EXCHEQUER RETURNS published yesterday show Government tax revenue close to targets set in the budget, adding to evidence from other sources that the economy is stabilising.
The exchequer deficit – the shortfall of tax revenue over spending – was smaller than for the same period last year, the first time this has happened since the crisis in the public finances began.
The Department of Finance said the figures to the end of April were “broadly in line with expectations”. Previous exchequer returns this year have failed to meet Government targets.
The figures were released hours after a measure of activity in the key services sector showed it had returned to growth in April for the first time in 27 months.
“It will be some time before the end of the recession is felt on the ground, but technically at least it looks to have come to an end,” said Brian Devine, economist at NCB Stockbrokers, interpreting the latest purchasing managers’ index data.
In Brussels, the European Commission said in its spring economic forecast that Ireland’s economic contraction would be “much less pronounced” this year and that growth “should resume” in 2011.
Economics commissioner Olli Rehn said he agreed with Minister for Finance Brian Lenihan that the worst was over for the Irish economy.
The commission said the economy would grow by 3 per cent in 2011 after contracting by 0.9 per cent this year – better than the 1.4 per cent contraction it had previously projected.
Tax receipts during the period to April, while down 10.8 per cent on the same period last year, were in line with Government targets while spending by Government departments, at €14.36 billion, was 8.1 per cent below that of the first four months of 2009.
Economic commentators said last night the exchequer figures indicated tax revenues could soon be ahead of target and contributed to optimism that the public finances could be stabilised.
“We know that real economic activity has steadily improved month on month throughout the year,” said economist Rossa White of Davys, “so the momentum suggests it won’t be long before tax revenue is actually ahead of forecast.”
Fine Gael’s finance spokesman Richard Bruton said an unexpected windfall in corporation tax receipts had created an impression of stabilisation.
However, the fiscal austerity being pursued relentlessly by Mr Lenihan was not a credible policy.
“This could well prove to be a false dawn and we cannot afford to be complacent. We have seen many similar blips before in the public finances.”
Labour Party finance spokeswoman Joan Burton said the returns highlighted the frailty of the economy and the absence of a jobs strategy. While receipts were in line with targets, the total tax take was 11 per cent down on the same period in 2009, which itself was down 24 per cent on the previous year.
“Without a coherent jobs strategy, the economy will continue to struggle and lifeless tax returns will put pressure on the exchequer deficit.”