Tax revenues for October show signs of stabilising

TAX AND public spending figures are broadly on target ahead of the finalisation of the Government’s four-year budgetary plan.

The exchequer returns for October, published yesterday, indicated tax revenues continue to show signs of stabilising.

In October, tax receipts were 5 per cent higher than in the same month in 2009. It was the second consecutive month that receipts rose year on year.

Over the first 10 months of the year, the total tax take was 5.4 per cent lower than in the same period in 2009. The most significant details in yesterday’s figures were the income tax returns for the month.

Income tax receipts of €1,261 million were taken in. Although this was 5 per cent below the same month in 2009, it was only a fraction below the Department of Finance target, set out almost a year ago, after having fallen considerably below target over most of the year.

In October 2009, income tax revenues stood at €1,328. The second-highest monthly income tax returns are typically recorded in October. Yesterday’s figures suggest employment and earnings may be stabilising.

Income tax receipts have been the weakest performing of the main tax sources in 2010. Income tax is also the largest single source of revenue. Corporation tax revenues in October, at €434 million, were more than double the expected figure and almost twice the figure recorded in the same month last year.

In 2009, corporation tax was the third-largest source of revenue, bringing in almost €4 billion. In the first 10 months of 2010, €2.6 billion was raised in corporation tax. This is almost €0.5 billion ahead of target, but €0.2 billion lower than at the same point in 2009.

November is usually the month in which most corporation tax receipts are filed. For the full year, receipts are likely to be well ahead of (low) targets, but below corporation tax receipts in 2009.

On the spending side, exchequer expenditure was €1.6 billion lower in the first 10 months of 2010 compared to the same period in 2009.

This was mostly as a result of an unspent capital allocation of more than €1 billion over the course of the year to date.

By department, 13 of 15 registered year-on-year spending declines in the first 10 months of the year. The Departments of Social and Family Affairs; and Communications, Energy and Natural Resources were the only two to record increases on 2009.

Separately, servicing of the national debt continues to rise rapidly. In the first 10 months of the year, it stood at over €3.2 billion. This was a 25 per cent increase on the same period in 2009.

The monthly exchequer returns are a narrower measure of Government involvement in the economy than the EU-compatible figures, known as the General Government Budget Balance.

The deficit on this basis determines whether Ireland complies with commitments as a euro-zone participant. It is also the figure watched most closely by financial market participants.

The Government remains committed to reducing its deficit by this measure to 3 per cent of gross domestic product in 2014. It is expected to reach an unprecedented 32 per cent this year.