Exchequer deficit declines in March

 

Ireland’s exchequer deficit for March was €2.8 billion lower than the same period last year following the Government's deferral of Anglo promissory note debt last month, figures from the Department of Finance show.

The latest exchequer returns, published today, put the exchequer deficit at €4.3 billion for the end of March, down from the €7.1 billion recorded at the same stage in 2011.

The Government last month won agreement from European institutions to defer a cash payment of €3.06 billion which was due to be paid out the bailout bill for Anglo Irish Bank and Irish Nationwide, resulting in a lower than expected capital expenditure bill.

Tax revenues for the first three months of the year were more than €1.2 billion ahead of the same period last year.

The figures indicated overall tax revenue for the end of March was €8.7 billion, up nearly 16.2 per cent on last year.

The tax take was also €809 million or 10.2 per cent ahead of the department’s own projection.

The large year-on-year increase was partly due to the late payment in January of more than €250 million in corporation tax which had originally been due in December.

The figures were also boosted by a 25.8 per cent surge in income tax receipts, which came in € 739 million up on last year, reflecting the impact of the universal social charge and the technical reclassification of receipts from employers which they had previously returned as PRSI.

Adjusting for this reclassification, the department estimated that income tax was around 3.5 per cent ahead of target.

Significantly, the VAT receipts for the end of March, which was the first period to reflect the impact of the two percentage point increase introduced in Budget 2012, amounted to €3.3 billion, €128 million ahead of target.

Excise duties – the other “big four” tax-head – underperformed, recording a €28 million shortfall in the month and a €42 million (4.1 per cent) shortfall in the first quarter.

While monthly tax receipts are traditionally volatile, they are still one of the most accurate measures of the health of the economy.

The figures showed the increased tax and non-tax revenues were offset by the higher cost of servicing the national debt.

The State has spent €2.4 billion so far this year servicing the interest on its debt, up €1.5 billion on same period last year, reflecting the State’s bigger debt burden.

Describing the figures as "pretty good", Minister for Finance Michael Noonan said the data showed Ireland was well on course to reduce its deficit to 8.6 per cent of GDP this year, in line with the troika's bailout requirements.