Ireland on track to exceed budget target

Ireland is on track to exceed its 2014 budget target which provides the Government with leeway to ease up on the planned €2bn budget consolidation in October.

The budget deficit for the first six months of the year was €4.9bn, which is a €1.7bn improvement on the same period in 2013, according to the latest exchequer returns.

Total revenue for the first half of the year was €24.2bn, on the back of buoyant tax receipts, which were up across most categories. Total net expenditure was €29.1bn with spending down across all government departments except for health.

The Government has an agreement with the troika to hit a target fiscal deficit of 4.8% this year and reduce it below 3% by the end of 2015.

The European Commission and the IMF, as well as the Irish Fiscal Advisory Council, have all urged the Government to implement a €2bn adjustment in October’s budget. The rationale for this level of budget cuts is that the growth backdrop is very uncertain.

According to Department of Finance officials, the exchequer figures are €500m above expectations for the first six months of the year.

Merrion Stockbroker economist Alan McQuaid said that based on current growth assumptions, he expects the budget deficit to come in between 4% and 4.5% for this year.

Finance Minister Michael Noonan has said he will wait until the end of the summer when there is much greater clarity on tax figures for the year before he makes any final decision on the scale of the budget adjustment on October 14.

According to the latest exchequer figures, income tax receipts for the six-month period were €7.831m, 0.8% ahead of profile and 7.4% ahead of the same period in 2013. Vat at €5.559m is 2.1% ahead of profile and up 7.3% on 2013. Excise duty is 6.7% ahead of profile and up 7.25% year-on-year at €2.380m.

Corporate tax is down 9.4% against profile and down 15.3% on the year at €1.755m.

However, this is explained by the introduction of the Single Euro Payments Area which delayed €285m of payments and a one-off €140m receipt that showed up in the 2013 accounts. On an underlying basis, corporate tax receipts were up €140m compared with the first half of last year.

Gross voted expenditure of €25.951m for the six months is €359m below last year and net voted expenditure of €20.523m is down €450m on the year.


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