Exchequer deficit down 13% to €3.7bn

The exchequer deficit fell by over 13% — to just under €3.7bn — on an annualised basis, in the first three months of the year, despite the Government narrowly missing its quarterly revenue targets for headline categories such as income tax and Vat, reports the Examiner.

Although the first quarter’s Vat revenue of nearly €3.3bn fell 2.1%, or €72m, short of budgetary targets and the €3.66bn income tax receipts were 0.3% or €11m short; both categories were up on a year-on-year basis — income tax by nearly 8% on an adjusted basis when one-off items are taken into consideration.

The Department of Finance said yesterday that total tax revenue amounted to almost €8.82bn during the three months to the end of March; 0.6%, or €47m, ahead of target. This was despite marginal missed targets in the areas of excise, capital gains tax and capital acquisitions tax; the latter two categories were also down on an annualised basis.

Corporation tax receipts amounted to €394m; 60% ahead of target and largely boosted by one unexpected early payment of €140m; and the first quarterly local property tax measure showed a €1.3m receipt.

Commenting on the first quarterly set of exchequer returns of 2013, Finance Minister Michael Noonan said that the figures proved progress is being made on reducing the national deficit, but noted that further targeted consolidation is necessary to ensure the stability of the public finances.

“However, we will continue to ensure that the remaining consolidation is fair and minimises the impact on job creation and growth,” he added,

Mr Noonan said that the good year-on-year showing from income tax receipts was noteworthy given no increases in income tax credits, rates or bands and “may be reflective of the stabilising labour market evident over recent quarters”.

Overall, yesterday’s ‘on target’ returns were met positively. Peter Vale, tax partner with Grant Thornton, called them “another good set of figures”, but in relation to the Vat, he sounded a note of caution: “Vat is a good indicator of the strength of the domestic economy, so the next set of key Vat figures — in early June — will be critical.”

Davy Stockbrokers’ chief economist, Conall MacCoille echoed concern for weakening Vat receipts, saying they could indicate consumer spend declines for the first quarter, after a strong second half to 2012.

Meanwhile, expenditure was down by nearly 6% — or €689m — to €10.9bn, for the first quarter, while national debt servicing costs fell by €424m, or 18.3%, year-on-year.

“We are making progress, but the fact remains that we still have a sizeable deficit in our public finances that we must bridge.

“We have to reduce our level of spending and increase the amount of revenue we collect in order to close that gap further and bring about renewed public finance sustainability,” Mr Noonan said. Source: The Examiner.