Government tax revenues continued to rise in July, providing Finance Minister Michael Noonan with more good news as the Department of Finance works intensively on preparations over the summer for the October budget.
However, a modest increase in Vat receipts may give the Government cause to think about the strength of the domestic economy.
Analysts have long estimated that the Government could have up to €2.5bn in its coffers for pre-election give-aways, but a complex set of EU fiscal rules limits the amount any government can spend. Mr Noonan has said that the Government will stay within the rules, with an expansionary budget of €1.2bn to €1.5bn.
Yesterday, the Department of Finance said it had collected tax revenues of €24.53bn in the first seven months of the year. That’s €2.16bn, or 9.7%, more in the coffers than it had a year ago. The key number however is that it had collected €893m more at the end of July than it had targeted for at the time of the budget last October.
Taxes based on company profits and employment again all showed large increases. The Exchequer had collected €9.76bn in income taxes in the first seven months, up 5.6% in the year.
It had €7.66bn in Vat receipts, an increase of 7.9% in the year. However, Vat receipts were only 1% “ahead of profile” or above what the department had anticipated last October.
That suggests that talk of a consumer-led recovery may be overdone. The third largest tax source at the end of July — excise duties — rose 6.1% to €2.92bn. The next largest tax source — corporation taxes — totalled €2.89bn, posting a huge 36.7% surge from the same period a year ago.
That is €653m more than the Exchequer had anticipated. The annual budget deficit will now likely fall below 2% of GDP in 2015, Davy Stockbrokers said. “Other important headings of income tax, Vat and excise duties are cumulatively just €106m ahead, suggesting that the Government should err on the side of caution in budget 2016,” it said.
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