Deficit shrinks €1.8bn after solid tax-take

The budget deficit contracted to €3.5bn at the end of May compared to a €5.3bn deficit for the same period last year.

Overall, tax receipts came in ahead of target in all categories except capital gains tax, while spending came in below forecast — although there were continued overruns in the Department of Health.

“This is yet another set of solid figures, both in respect of tax receipts and spending control. Notwithstanding the cumulative effect of six years of tax increases, there is a renewed sense of consumer confidence, reflected in higher spending and resultant robust Vat returns — 4.4% ahead of this point last year,” said Peter Vale, a partner at the consultancy firm, Grant Thornton.

Total tax revenue for the first five months of the year reached €15.59bn, which was a 5.6% increase on 2013. Income tax performed particularly well and was up 7.8% for the year to €6.598bn. The Department of Finance said this reflected the robust levels of job creation over the past 12 months. Vat, corporation tax, stamp duties and excise duties were all up over the five-month period.

“So, the picture remains largely unchanged. Tax receipts are being boosted by the uplift in the jobs market, while commensurate savings in social protection and capital expenditure are offsetting overruns in Health,” said Davy Stockbroker economist, David McNamara. Overall net expenditure to the end of May was €17.197bn, down 2.7% year on year, and €156m below profile.

There was a decrease in spending across all departments except the Department of Health which was 2.8% ahead of profile.

“There are mixed messages in terms of possible relief for taxpayers later this year but on balance, it appears there will be some respite in terms of adjustments to tax bands and perhaps tax credits. However, this will be offset by the looming water charges, most likely leaving the taxpayer in a worse off position next year,” said Mr Vale.