EXCHEQUER RETURNS:HIGHER THAN expected tax revenues from exporting companies allowed the Government to exceed its overall tax revenue target in 2010, the latest data from the Department of Finance shows.
Tax receipts for last year arrived at €31.7 billion, some €703 million ahead of projections. A large surge in corporation tax receipts at the end of 2010 as a result of a recovery in the export sector meant this category of tax came in ahead of expectations by €764 million or 24 per cent.
Total Government spending was down 1.5 per cent compared to 2009, at €46.4 billion.
The exchequer deficit stood at €18.7 billion at the end of the year, compared to a deficit of €24.6 billion at the end of 2009.
Michael McGrath, an assistant secretary at the Department of Finance, said various “pluses and minuses” had led to the year-on-year reduction in the deficit. A large part of the improvement is due to the fact that payments of €3 billion to the National Pensions Reserve Fund (NPRF) and €4 billion to Anglo Irish Bank made in 2009 were not repeated last year.
Total net voted expenditure was also €0.7 billion lower in 2010 than the previous year, while non-tax revenue rose €1.9 billion.
But these factors were partially cancelled out by a €1.3 billion or 3.9 per cent year-on-year decline in tax revenues, a €1.6 billion rise in the cost of servicing the national debt and an €800,000 injection into EBS, Irish Nationwide Building Society and the National Asset Management Agency (Nama).
Minister for Finance Brian Lenihan said the figures provided further evidence that the public finances were stabilising. “It is to be welcomed that three of our big four tax heads – VAT, excise duties and corporation tax – performed above expectations,” he said.
Although the Opposition pointed to evidence of a two-speed recovery, some economists welcomed evidence of a reinvigorated corporate sector.
“As frustrating as the banking sector has been, it is worth remembering that the rest of the economy is still operating and trying to fight its way out of the recession,” said Brian Devine, economist at stockbrokers NCB.
Employers’ group Ibec said the figures were “a source of optimism” for 2011, while economists Simon Barry and Lynsey Clemenger at Ulster Bank said the fact that six out of eight tax categories were now running higher than they were a year ago was “an important sign that the economy’s trajectory is now much improved”.
Alan McQuaid, economist at stockbroking firm Bloxham, said he was “not writing off the Government just yet” in relation to its ability to achieve its budgetary targets for this year without introducing further cutbacks.
The Government collected €10.1 billion from VAT last year, which was in line with projections but down 5.3 per cent on 2009. The figures do not include consumer spending over the Christmas period. Receipts from income tax – the largest category of tax – were subdued, sliding 2.2 per cent or €254 million behind target and finishing at €11.3 billion, down 4.7 per cent compared to 2009.
Mr McGrath described the level of income tax receipts as “a significant minus” for the exchequer last year. There was some improvement in the final months of 2010, including a €102 million higher than expected haul from income tax for the month of December.
Once the effects of Budget 2011 measures are stripped out, the Department of Finance expects receipts from income tax to be flat this year, as the labour market continues to stagnate.
The lower than expected income tax receipts were echoed in a shortfall in health levy and PRSI receipts, which meant that net current – or day-to-day – spending at the Department of Health and the Department of Social Protection ran ahead of projections.
Total current expenditure across all departments was up 0.6 per cent year-on-year and came in €231 million or 0.6 per cent ahead of targets at €40.5 billion. The large shortfalls in capital spending compared to the Government’s own projections were mostly eradicated by the end of the year, which the department said reflected the fact that the earlier shortfalls had been a “timing issue”. Capital spending of €5.9 billion fell short of its target by just €82 million or 1.4 per cent. However, it was down 14.3 per cent year-on-year, as money for large infrastructure projects was withheld.
