Tax take in year to end July 1.4% over target

TAX REVENUES in the first seven months of the year were slightly ahead of target, according to exchequer returns published yesterday. While the budget deficit continued to widen on the back of a €10 billion injection into the banks, it appears the economy is performing broadly in line with EU-International Monetary Fund targets.

Overall, €18.6 billion in taxes was collected, 1.4 per cent (or €263 million) ahead of the target set out in January. Three of the “big four” taxes were in surplus.

Total revenues were up 8.6 per cent on the same period in 2010.

Higher-than-expected income tax returns helped push receipts up, with €7.3 billion collected, 2.2 per cent ahead of target, and up by 25 per cent on the same period in 2010. Income tax receipts were boosted by measures such as the universal social charge in last December’s budget. However, once the beneficial impact of earlier-than-expected Dirt payments, both in April and July, are excluded, income tax is running a little below target for the first seven months.

Corporation tax revenues were also better than expected, at € 1.7 billion, up by 6 per cent or €93 million on targets, and by 1.4 per cent on 2010. This was due in part to a delay in payments from May.

Excise duties were also ahead, with €2.6 billion collected, 2.6 per cent up on January’s target. Stamp duties exceeded the target by 27.8 per cent, at €415.4 million, due to the contribution of the pension fund levy, introduced to finance the jobs initiative in May.

Reflecting weak consumer spending, however, value-added tax receipts were lower than expected, by almost 3 per cent or €190 million, at €6.4 billion.

In the first seven months, some €10.7 billion was put into the banks as part of recapitalisation efforts, which pushed the budget deficit to €18.9 billion, up from €10.2 billion for the same period in 2010. However, when the contribution to the banks is stripped out, the budget deficit stands at about €2 billion less than this time last year, at €8.2 billion.

Total spending was €25.7 billion, 2 per cent, or €536 million less than predicted. Year on year, spending increased by 0.9 per cent or €224 million, but this was due to a reclassification of the health levy due to the introduction of the social charge.

The State underspent by €125 million in social protection, €116 million in education and skills and €95 million in agriculture, fisheries and food.

Conall MacCoille, chief economist with Davy Stockbrokers, said the returns were “an encouraging sign that the budgetary plans for 2011 are on track”.

KBC Bank economists noted that while “sentiment towards Ireland may not improve much because of good numbers”, given the level of uncertainty at a global level, “the risks of a sharp deterioration are reduced”.