Quarterly budget surplus for first time since before economic crisis

The public finances have shown a quarterly surplus for the first time since before the financial crisis, cementing hopes that the Government will meet its budget deficit targets for the year.

The latest exchequer returns, published yesterday, showed a surplus of €197m for the three months to the end of March, an improvement of €2.51bn on last year, when a deficit of nearly €2.32bn was noted for the same period.

In basic terms, it shows the Government took in nearly €200m more than it spent during the first quarter.

The figures, released yesterday by the Department of Finance, show that nearly €10.5bn in tax revenue was generated in the first three months of 2015. This represents a €1.24bn, or 13.4%, increase on the same period last year. It also represents a €545m (5.5%) beating of estimates laid out in the budget last October.

Strong growth in receipts were also noted in each of the main tax brackets. The income tax take was up by 7.7% at €4.24bn. For the month of March alone, income tax receipts totalled €77m, 6.1% ahead of expectations.

Vat take for the quarter amounted to almost €3.8bn, a near-13% rise year on year. For March, Vat was up by over 1% at €16m.

Corporation tax was up by nearly 117% for the quarter, at €555m.

Local property tax took in €244m, a rise of 13.5%.

Finance Minister Michael Noonan said the better-than-expected figures keep the country on course to meet its fiscal target for the year. The aim is to reach, or beat, a GDP budget deficit target of 2.7% for 2015.

“Of particular note is the performance of the main four tax heads, which all show significant year-on-year growth,” Mr Noonan said.

“The €302m increase in income tax collected on the same period last year is real evidence of the number of jobs being created. This has been achieved despite the reductions in income tax and USC which I introduced in Budget 2015.”

As well as tax revenue, the first-quarter surplus was boosted by a large one-off transfer to the exchequer from the National Pension Reserve Fund from the sale of the State’s stake in Bank of Ireland. This was ultimately used to cover the recent early repayments of the country’s IMF loans.

On the back of the latest figures, commentators raised hope for a friendly budget later in the year.

“It now looks likely that the Government will significantly beat its 2.7% of GDP deficit target for 2015. In this context, the Government is unlikely to resist intensifying calls for a giveaway budget ahead of the general election due early in 2016,” according to Conall Mac Coille, chief economist with Davy Stockbrokers.

His counterpart in Merrion Stockbrokers, Alan McQuaid, suggested yields on Irish government debt may soon fall to a 0.5%-0.75% range, leading to “significant savings on debt servicing costs, and more room to manoeuvre in next October’s budget”.

Pater Vale, a tax partner at Grant Thornton, said: “Overall, the figures will encourage many to believe that further tax cuts are on the way in October. If current trends continue between now and Budget Day, then it would be a surprise if tax cuts were not a feature of the budget statement.

“We may get a better sense of the minister’s thinking in his spring statement later this month.”