Deficit drops 30% since last year

The exchequer deficit fell by 30% year-by-year during the first half of 2013, with tax revenues 1% ahead of Government expectations, latest Department of Finance figures show.

Updated exchequer returns published yesterday show the deficit stood at just over €6.59bn as of the end of June, down from €9.44bn at the same time last year.

The State’s overall tax revenues for the first half of this year amounted to just under €17.6bn; an improvement of €585m or 3.4% on the first six months of 2012.

Furthermore, the total was 1%, or €166m, ahead of expectations, helped by the receipt of €126m from the local property tax.

Overall State revenue — comprising both tax and non-tax revenue — for the first-half, rose from €18.74bn to €19.5bn.

While Vat revenue was down 17.6% in the month (June traditionally being a quiet month) and was nearly 3% down — year-on-year — for the six months, big areas like income tax and corporation tax (up nearly 14%) took up the slack.

Finance Minister, Michael Noonan said it had been a solid performance. “The performance of corporation tax is impressive and the performance of income tax, the largest source of revenue, is reflective of the gradual improvement in employment levels evident in recent months.”

Government spending remains in check, with the first half tally of just under €21bn coming in at 2.5%, or €533m, below target.

Reflecting on the returns, Peter Vale, tax partner at Grant Thornton, said they indicate the Government will have “limited scope” to cut taxes or increase spending in October’s budget.

“The public finances are in a more robust state now than at the start of the year, with the positive outcome of the EU discussions on our banking debt providing the possibility of some room for manoeuvre for the minister in October. However, scope for reduction in any headline income tax rates won’t come until next year at the earliest,” he said.

“Ireland’s strategy in the past couple of years has been to under-promise and over-deliver, a trend that we believe is likely to be maintained in 2013. Despite the fact that the risks to economic growth are clearly to the downside at this juncture, we still think that come end-December the budget deficit outturn, as a percentage of GDP, will once more be lower than the 7.4% 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,” added Alan McQuaid, of Merrion Stockbrokers.

“Restoring stability and order to the public finances is a necessary pre-condition for our return to economic growth, job creation and the strengthening of international confidence in this country,” Mr Noonan said.


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