Exchequer deficit €800m better than level forecast in last budget

A higher year-on-year tax take over the first seven months of the year has resulted in the Exchequer deficit standing at nearly €800m better than the level forecast in last October’s Budget. This strengthens the chances of a significantly more friendly adjustment in two months’ time.

Wed, 06 Aug, 2014 - 01:00

Geoff Percival

Latest Exchequer Returns, from the Department of Finance, yesterday showed a total tax take of just under €22.4bn for the period up to the end of July.

That marked a €1.35bn, or 6.4%, increase on the corresponding period last year.

Income tax receipts were up by 7.6% to just over €9.2bn; VAT totalled just over €7.1bn, 3.5% up year-on-year, and local property tax receipts were in line with profile at €338m.

Overall, the figures pushed the State’s deficit down to €5.18bn.

While technically slightly up on the €5.15bn at the same time last year, it is €798m better than forecast in the last Budget, thanks to increased tax receipts and reduced interest expenditure.

One-off transactions — such as the State’s sale of Irish Life and its disposal of contingent convertible bonds in Bank of Ireland — actually meant the latest deficit figure is a near €2.3bn improvement on the same time last year.

“If this pattern continues in the second half of the year, the Budget adjustment will be somewhat less than the €2bn originally planned,” Finance Minister Michael Noonan said last night.

“Taxpayers are likely to see some respite in their annual tax bills in the Budget, possibly through an increase in tax credits or a widening of the tax bands.

“While any such adjustment will still leave taxpayers considerably worse off versus their position in 2007, a decrease in their monthly tax bill in the region of €50 per month could be expected,” said Peter Vale, tax partner at Grant Thornton.

One surprising downside to yesterday’s updated figures, was the €21m year-on-year drop to €2.1bn in corporation tax receipts, although recovery was seen in July, alone, and the final figure was still ahead of profile.