Analysts stand by 2% GDP deficit despite tax decline

A budget deficit of under 2% of GDP is still anticipated for 2015, despite latest exchequer returns disappointing slightly.

Figures released by the Department of Finance yesterday show just over €2.39bn was taken by the Government in tax revenue in April, down 1.1% (€27m) on prior expectations.

However, overall, tax revenue was over €12.86bn for the first four months of the year, up 11.3% on the same period last year and 4.2% (€518m) ahead of estimates.

As of the end of April, the Exchequer deficit stood at €2.32bn, down from €4.75bn at the same point last year. The improvement has been driven by increased tax receipts and the transfer of €1.634bn from the National Pension Reserve Fund.

April’s figures showed further strong Vat and income tax receipts. Vat receipts amounted to just over €4bn, up by over 10% on an annualised basis and €43m ahead of expectations.

Income tax receipts came in at €5.75bn, up 6.3% on the same month last year. However, income tax was over 5% (€83m) down on expectations, due to weaker Dirtreceipts on the back of low interest rates.

Chambers Ireland said the below-profile monthly tax take highlights a need for caution. “While overall tax take for the year thus far is ahead of expectations, the month of April was behind profile,” said director of policy Mark O’Mahoney.

“This demonstrates the ongoing fragility of our economic recovery and reaffirms the need for Government to be prudent with October’s budget.

“Any measures introduced to put more money back into people’s pockets in the budget must be spread evenly across the public and private sector to ensure that all workers can feel the benefit.”

Davy Stockbrokers’ chief economist, Conall MacCoille, said: “PRSI social contributions were €24m ahead, spending discipline is being maintained, and debt interest payments are coming in below the October budget forecasts, due to the refinancing of expensive IMF loans. So we still expect the deficit to come in below 2% of GDP, following [this] slightly weak outturn.”

The Government is currently forecasting a 2.3% of GDP full-year deficit.