Another strong set of exchequer returns provides a fresh glimpse into the structure of Ireland’s economic recovery.
Income tax receipts are up as unemployed people return to work; VAT receipts are on the rise as consumers spend again; and the State is spending less than anticipated to service the huge debt accumulated after the crash.
The data also points to increased activity in the property market and the stock market.
The improvement in the outlook is such that the Government faces the growing likelihood of a clamour for pre-election largesse. A difficult political balancing act is in prospect.
Prudence
The firm message from Minister for Finance Michael Noonan is that there will be no wavering from the path of prudence.
Yet he is still seeking concessions in Brussels to allow a modest increase in public expenditure next year. This is on top of the tax cuts already promised for the October budget, the last before the Coalition’s mandate expires.
But what of the actual figures? Although the surplus in the public finances for the opening quarter of the year is the first since 2007, it’s not a real surplus at all. The figure is flattered by a once-off €1.6 billion capital receipt from the National Pension Reserve Fund of proceeds from the 2013 sale of preference shares in Bank of Ireland.
Without this money, used to part-fund early IMF repayments, there would have been a €1.44 billion deficit in the first quarter.
Still, the equivalent figure this time last year was €2.3 billion. The first quarter deficit in 2013 was €3.7 billion, and it was as high as €4.3 billion in 2012. So the trend is clear: almost €3 billion has been shaved from the deficit in three years.
As unemployment declines, revenue from income tax (including the universal social charge) continues to improve. The data shows the State collected €4.2 billion in income tax in the first quarter, up €302 million year- on- year and €77 million ahead of profile.
Two points are worth noting. First, the increased yield comes in spite of the income tax cuts that took effect in January. The returns are also deemed to reflect the increase in full-time employment, which boosts income tax revenues as workers clock up longer hours.
There are other aspects to the story. Stamp duties from property sales rose to €75 million in the first quarter from €50 million in 2014. The yield – 60 per cent non-residential transactions, 40 per cent residential – was 9 per cent higher than target.
The acceleration in stamp duties on share trades was even stronger. It rose 100 per cent year-on-year to €100 million, coming in 33 per cent above profile.
