Tax revenue €650m ahead of target

The tax take for the first two months of the year is more than €650m ahead of target.

But no one in Government circles was getting carried away yesterday, as a large portion of it was tax that was originally meant to have been paid last year.

The latest exchequer figures showed tax revenues for January and February had totalled €5.8bn.

This was some €656m more than the Department of Finance had expected to pull in.

But the department stressed that two “very specific factors” were driving the “over-performance”.

The first was that some €250m of corporation tax — or tax on company profits — was originally due to be received in December but did not arrive into the public purse until January.

The second was that income tax was €289m ahead of target mainly because of a “technical reclassification of receipts”.

This arose because employers had previously returned this money as PRSI, when in fact it should have been classified as income tax.

The exchequer is no better off as a result of the reclassification, because while income tax receipts have risen, it will now have to increase its subsidy to the PRSI-based Social Insurance Fund, from which welfare and state pension payments are made.

“It is important to note that the exchequer effect is neutral — what is gained in income tax is counterbalanced through higher net voted current spending,” the department said.

Elsewhere, the figures showed that the exchequer deficit stood at €2.072bn at the end of February compared with €1.945bn in the same period last year.

The department said the increased tax revenues had been offset by higher debt servicing costs, among other factors.

The figures came as the IMF said Ireland was continuing to meet its targets under the bailout programme, but debt sustainability continued to be a worry.

“The 2011 fiscal targets were met with a margin,” the IMF said in its latest assessment of Ireland.

“However, Ireland’s economy faces greater external and domestic challenges than envisaged at the outset of the programme.”

The organisation, which along with the EU and ECB forms the troika providing the bailout, said Ireland’s growth outlook had worsened as a result of the projected recession in the eurozone and the continuing lack of consumer spending.

As a result, it was “uncertain” if Ireland would be able to return to the money markets in 2013 as planned.

It also said debt sustainability “remains fragile”.