TAX REVENUES grew in February by 2.8 per cent compared to the same month in 2010, according to the latest figures released by the Department of Finance yesterday afternoon.
Since September 2010, year-on-year increases in monthly tax revenues have been recorded, with the exception of December, when a marginal 0.2 per cent decline took place.
Most of the increase was accounted for by income tax revenues, which grew by almost a quarter compared to February 2010.
This, in turn, was mostly the result of changes to the PRSI and the introduction of the universal social charge in Budget 2011, which affected the figures for the first time last month.
Excluding the budget changes which distort year-on-year comparisons, the department said that receipts flowing from PAYE revenues rose 6.6 per cent year on year.
Although the increases in income tax revenues were large, the total came in behind the department’s projections. Income tax is the largest since source of tax revenue.
VAT, which is the second largest source of revenue, declined by an exceptionally large 33 per cent.
The department noted the VAT decline in its information note released with yesterday’s numbers, but did not offer an explanation.
The third largest revenue source – excuse duties – partially offset the VAT decline, growing by 17 per cent year on year in February. As in the case of VAT, the change was unusually large.
Corporation tax, which is the fourth largest revenue stream, fell sharply in February. This is not exceptional as this tax stream is by far the most volatile.
Over the first two months of the year combined, tax revenue grew by 2.2 per cent compared to the same period in 2010.
On the expenditure side, spending fell by 2.4 per cent over the first two months of the year compared to January-February 2011.
This, however, was distorted by a reclassification of a large part of the costs of servicing the national debt, which cut the recorded figure by two-thirds (or some €259 million) compared with the same two-month period in 2010.
The department notes that a like-with-like comparison would show debt servicing costs reaching €626 million in the first two months of 2010, a large increase of €264 million year on year. The large underlying increase in debt servicing costs reflects the rapidly growing national debt burden.
Current spending in the first two months of the year rose by 3.4 per cent year on year.
This was partially offset by a decline in capital spending of more than half.
The large falls in capital expenditure in the early part of 2011 are the continuation of a pattern in evidence for more than a year.
The department reported that the exchequer deficit (the gap between revenue and expenditure) fell to just under €2 billion for the first two months of 2011.
Over the same two-month period in 2010, the deficit stood at €2.4 billion.