Exchequer heading for a surplus

A SURGE in home, car and cigarette sales has helped to boost the public finances.

Exchequer returns for the first six months of the year show excise duties are running €118 million ahead of target.

Department of Finance officials said yesterday that the buoyancy of car sales and a 16% rise in take from cigarette sales were behind the increase.

VAT receipts, reflecting the continued strong performance of the housing market and consumer spending, were up €174 million.

Corporation tax receipts were behind target, though the Department said timing factors were partly to blame for the poor outturn.

Income tax was €238m ahead of the same period a year ago as more people joined the workforce.

Overall, tax revenues since the beginning of the year are up €686m on last year, and some €320m more than the Department had planned for. Some €17.2 billion was collected in taxes since January.

On the spending side, Government departments have spent some 12% less than they should have on major infrastructure project, such as roads and hospitals.

The Department said spending on such projects tends to be skewed toward the end of the year and any money not used can be carried over to next year.

Economists said if the current trends continue, it was possible the Exchequer could record a surplus.

“The Government remains on course to significantly improve upon its budget day borrowing target of €2,988 million. A modest surplus is possible, but spending decisions will be crucial to the outcome,” Friends First chief economist Jim Power said.

A €500 million tax surplus was being forecast by the Department of Finance for the year yesterday, but this figure could rise substantially as it does not include the hundreds of millions of euro expected to be netted by the Revenue Commissioners from its various investigations of tax evasion.

The Department are expecting to net only €200m from Revenue’s various investigations this year. Some 10,000 people are due to make settlements with the Revenue by July 22 from its probe of the insurance market. According to some estimates this could net €500 million for Revenue, meaning a windfall for the Exchequer. However, Davy Stockbrokers said it was too early to tell if surplus could be achieved.

“One unknown is the amount of extra expenditure that will fall in 2005 to tackle the nursing homes debacle. If half of the projected €1 billion is required to be spent this year, it may be hard for the government to undershoot the deficit target,” said its chief economist Robbie Kelleher.