DUBLIN: New figures released on Friday show that the Exchequer posted a deficit of €329m at end-August compared to a budget deficit of €1,291m in the same period last year.
The €962m year-on-year improvement in the balance was primarily driven by a year-on-year rise in tax revenue, albeit partially offset by increased voted expenditure and reduced non-tax revenue
Tax revenue of €29,046m was collected in January-August, an increase of €1,702m or 6.2% on the same period last year. In last October’s Budget, the Department of Finance forecast an overall annual increase in tax revenue this year of 5.8%, but the overall out-turn for 2015 was higher than projected so that the actual increase for 2016 is now put at 3.6%.
Income tax receipts of €11,699m were collected in the first eight months of the year, which represented a year-on-year increase of €477m or 4.2%. This performance is consistent with the recovering labour market with solid employment growth as evidenced by the Quarterly National Household Survey and the latest monthly unemployment data.
Ireland collected €449m or 1.6% more tax than expected in the year to the end of August, but the outperformance deteriorated significantly over the last three months. Ireland had taken in 4.3% more tax revenue than expected at the end of May, but the Department of Finance had warned some large unexpected payments were driving the increase and were likely to unwind. The Department now expects the total tax take for 2016 to be 2.0% ahead of forecasts.
Corporation tax, which surged to record levels in 2015, remained the largest contributor to the outperformance, rising 5.8% year-on-year to come in 17.1% ahead of target, a moderation on growth earlier in the year. Buoyed by strong car sales, excise duties grew 7.4% faster than the Department of Finance had originally anticipated.
According to Merrion Stockbrokers, “The Minister for Finance Michael Noonan originally set a General Government Deficit target of 1.2% of GDP for this year in Budget 2016 although this was subsequently revised down to 1.1% in the Stability Programme Update.”
They added, “With the Irish economy set to grow strongly again in 2016, the underlying deficit is in our view likely to come in at less than 1.0% even allowing for some potential expenditure over-runs, particularly on the Health Vote.”
