Budget pressure as tax take falls further

There was a further deterioration in tax returns in November, particularly income tax, which could increase the pressure on the Government to meet its 2013 budget targets.

Budget pressure as tax take falls further

The budget deficit at the end of November was €12.97bn compared with €21.4bn for the same period in 2011. However, last year’s figure included a €3.1bn promissory note payment that was replaced with a Government bond this year and one-off bank recapitalisations in Jul 2011.

The tax take, which came in at €33.8bn for the first 11 months of the year, was €171m less than forecast, with a €267m shortfall for November. The Government forecasts that tax revenues for 2012 will be €210m behind target.

Income tax was €231m below profile, with most of the shortfall stemming from the self-employed sector.

“The figures for November continue the October trend of failing to meet the targeted tax take. Worryingly, the income tax receipts for the hugely important month of November are 12% behind target,” said Peter Vale, a tax partner at Grant Thornton.

“To ignore the November figures risks creating the requirement for an even bigger adjustment this time next year.

“The November figures also indicate that we are reaching a tipping point when higher income tax diminishes incentives to work or pushes income into the black economy, with the perverse impact of reducing tax receipts. The Government’s recognition of this will be reflected in the move towards wealth-based taxes, such as the property tax.”

Corporation tax receipts were €21m below expectations for the end of November, but revenues from this category were 11% above the same period in 2011.

Vat returns have performed robustly in the year to date. Receipts are 4.4% ahead of the Nov 2011 figure and are running €21m — 0.5% — ahead of profile for this year.

However, excise duties continue to underperform — coming in €179m behind target on a cumulative basis.

Expenditure in the year to the end of November was €40.6bn, which was €249m ahead of profile. The Government projects that total expenditure for the year will reach €41.7bn.

Current expenditure is €654m ahead of profile for the 11 months to the end of November whereas capital expenditure is €405m below target.

Social protection and health are responsible for the two biggest overspends. Social protection exceeded its target by €614m, although this drops to €238m excluding the impact of a PRSI shortfall. Health overshot its target by €366m.

The cost of servicing the national debt was €6.5bn at the end of November.

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