Boost to economy as finances better than forecast

The State’s finances are in better shape than expected, with tax revenues higher and spending lower than forecast, according to the exchequer returns for 2012.

Minister for Finance Michael Noonan welcomed the figures, saying the outcome was better than the figures on which the budget was framed.

“This is a positive development as we start the new year. It gives me further confidence that the budget tax revenue target for 2013 is both robust and achievable,” he said.

Although all Government spending and revenue figures are not yet available, Mr Noonan said the widest deficit measure, and the one watched most closely by financial markets and the EU-IMF bailout troika, will come in below 8 per cent of gross domestic product (GDP) for 2012.

On budget day less than a month ago, this measure, known as the general government deficit, was expected to stand at 8.2 per cent of GDP in 2012. A year ago the target was 8.6 per cent. “We are now going to comfortably beat 8 per cent with an outcome of 7.9 or 7.8 per cent is realistic,” said the Minister, who pointed out that the target for 2013 was 7.5 per cent.

Momentum

“Our budget position for 2013 is quite comfortable. We should be in a position barring war or pestilence to achieve our targets fairly comfortably,” he added.

Yesterday’s figures will add momentum to the Government’s efforts to exit the bailout and are likely further to boost international investor sentiment towards Ireland.

Among the most positive out-turns was a strong surge in tax revenues in December compared with the same month a year earlier. An increase in receipts of almost 30 per cent was the second-highest year-on-year increase for a single month since the recession began. Much of the increase was accounted for by unexpectedly large payments of corporation tax by two (unnamed) foreign multinationals.

Surplus

The figures show that tax revenue for 2012 was up by €2.6 billion on the previous year, with total tax receipts for 2012 of €36.65 billion.

The take in December taxes was better than expected, with a surplus over €440 million in the month.

For the year as a whole, corporation tax, VAT, stamp duties, capital gains tax and customs duties were all ahead of target, but income tax, excise duties and capital acquisitions tax were below target.

Income tax was €124 million behind target but VAT receipts came in at €176 million above target. Corporation tax receipts finished the year €196 million above target while excise duties were €108 million behind target.

Government spending for the year was on target despite overspends in social protection of €560 million and health of €311 million.

These were offset by underspending in other areas and by the sale of mobile phone licences that generated more than €400 million.

The settlement of the €3.1 billion promissory note bill for the year helped to reduce the non-voted capital expenditure bill to €8.3 billion. Debt-servicing costs also added to pressure on spending.

In a joint statement Mr Noonan and Minister for Public Expenditure and Reform Brendan Howlin said the outturn highlighted the continued improvement being made in the public finances.