THE FIRST 2011 figures for taxes collected and money spent by the Government suggest the economy continues to stabilise.
The numbers, published yesterday by the Department of Finance, show total tax receipts in January increased by 1.9 per cent compared to the same month in 2010, or by €57 million. This maintains a trend seen since the second half of 2010, coming after an extended period in which revenues collapsed, opening up a historically large deficit in the public finances.
Although monthly tax revenues can be volatile, they are among the most timely indicators of the performance of the wider economy. The figures suggest that the economy is stabilising.
The growth in total tax revenue masks considerable variation across the range of taxes. In January, value added tax (VAT) revenue grew by 3.6 per cent on the same month in 2010.
By contrast, income tax receipts, typically the largest source of revenue, fell by 6.5 per cent year on year. This happened despite large increases in income tax rates in the December budget.
A Department of Finance spokesman said that time lags meant the effect of higher rates was not yet being seen in revenues. Most of the money that flows into the State’s coffers in any given month relates to taxes paid by individuals and businesses in the previous month. Excise duties, usually one of the largest revenue flows for the Government, rose by over 8 per cent year on year.
Overall exchequer spending in January was down year on year owing in part to an accounting change which saw much of the cost of servicing the national debt funded from non-exchequer sources.
The Government said at the time of the budget that €600 million of the estimated €5 billion in debt servicing costs would be paid from the Capital Services Redemption Account rather than from the exchequer. Much reduced capital outlays also contributed to the overall decline. At €214 million, capital spending was less than half that recorded in January 2010.
Day-to-day exchequer spending in January rose slightly. The Department of Finance said the increase was “due primarily to the reclassification of health levy receipts which increases net voted current expenditure”.
Of the 15 Government departments, 12 recorded declines in spending in January compared to the same month in 2010.
The three departments which spent more in January this year than last were: Health and Children, Community Rural and Gaeltacht Affairs, and Finance.
With spending down and revenues up in January compared to a year earlier, the exchequer deficit narrowed considerably. In January 2010 it stood at €780 million. This year in the first month of the year it had fallen to €480 million.
