Buoyant tax receipts reflect economy’s rapid growth
A buoyant set of exchequer figures for May confirm that the economy is growing rapidly. The Department of Finance figures showed that revenues from all the main tax headings rose significantly in the first five months of the year.
Overall, the Government collected tax revenues of over €17.28bn in the first five months to the end of May, up 10.9% in the year.
The Government collected €734m more in tax receipts than it had expected at this stage in the year.
Accounting for expenditure, revenue and lower debt interest items, Conall MacCoille, chief economist at Davy Stockbrokers, estimates that the Government now has €1.7bn more in its coffers than it had anticipated at the time of the last budget in October.
Analysts said that the increase in Vat and income tax receipts will please the Government because they show that consumer spending may at last be returning after the years of crisis.
Vat receipts rose 9.5% in the year to €5.7bn, contributing €90m more to the Government’s coffers than the exchequer had projected.
Income taxes increased in the year by 6.7% to €7.03bn, suggesting that the recent reports of increases in employment in the past year are boosting Government revenues. Income tax receipts were ahead of what the Government had expected at this stage of the year by 0.8% or €54m.
Corporation tax receipts surged by 55.6% or by €546m in the year to over €1.52bn. Those receipts were 46.5%, or €485m higher, than the level the Government had forecast in its so-called profiles of expenditure. The Government collected over €2bn in excise taxes to the end of May, a 4.5% rise in the year, but 1% or €20m, less than it had expected.
The Department of Finance said that non-tax revenues of €2.15bn rose 28.3%, or €475m, in the year. It said the main reason for the increase in income contributed by the Central Bank of around €500m in the year.
Debt servicing costs to the end of May totalled €3.35bn, significantly lower by €111m from a year ago, because of the early repayment of most of the bailout loans borrowed from the IMF.
Voted expenditure, at €17bn, was 1.8% or €306m below profile and gross voted expenditure was 0.5% or €116m below profile.
As a result, the Department of Finance said that the exchequer was in surplus by €641m at the end of May, compared with a deficit of €3.46bn at the same stage last year.
Philip O’Sullivan, chief economist at Investec Ireland, said the Government was well on its way to hitting its budget deficit targets.
“On budget day last October the Government had targeted a deficit of 2.7% of GDP for 2015. On this run rate and after considering the ‘lumpy’ corporation tax factor it should come in at or below 2% of GDP, assuming no overly dramatic policy departures ahead of, or following, the election that could come as early as the autumn,” Mr O’Sullivan said.
Mr MacCoille said Central Bank surplus income of €300m following the wind-up of IBRC, lower gross voted current and capital expenditures, and a lower debt interest bill has boosted the Government’s coffers.
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