State’s tax revenue on course for targets

The Government’s tax take at the end of February was down €77m on the year, mainly because of one-off factors.

However, the Government remains on track to meet its deficit reduction targets for the year.

Over the month of February, tax revenues were down €186m compared with the same period in 2012.

Income tax was down €123m in February, mostly due to the reclassification of PRSI/income tax last year, which boosted returns by €150m for that period. On a cumulative basis, income tax is flat year-on-year.

“[These] figures show that the strong income tax performance in January was offset by a flat February, meaning overall income tax receipts are now just marginally ahead of last year’s levels,” said Peter Vale, a partner at the consultancy firm Grant Thornton.

“There has been positive employment data in recent weeks and this should translate into stronger income tax receipts as the year progresses. However, it isn’t yet reflected in the exchequer returns.”

Corporation tax did well over the year. Year-on-year growth reached 8.9%. On a cumulative basis, it grew by 6.8% — stripping out one-off factors.

The Feb 2012 corporate tax payment was inflated by a €251m late payment that had been due in Dec 2011.

Excise duties were up 1.6% year-on-year at €650m but, compared with the same month in 2012, excise duties were down 5.6%.

Vat recorded cumulative growth of 2.6% for the year and a much more robust 16.3% compared with the same month last year.

The increase in Vat returns reflects the much stronger core retail sales seen over the past few months.

Stamp duties have increased a massive €184m on a cumulative basis for the year, but this is due to a timing issue related to the health insurance levy. This is expected to level out over the course of 2013.

Net voted expenditure was down across all categories.

“Following December’s sixth austerity budget since Oct 2008, Ireland is aiming for a general government deficit of 7.5% of GDP this year. The official strategy of under-promising and over-delivering is set to be repeated again in 2013 in our view,” said Merrion Stockbroker economist Alan McQuaid.

“Despite the fact that the risks to economic growth are to the downside at this juncture, we think that, come end-December, the budget deficit out-turn as a percentage of GDP will once more be lower than the figure officially targeted, which will only further enhance the allure of Irish government bonds and boost the country’s chances of exiting its EU/IMF bailout on schedule.”