AnalysisA wobbly performance on tax and wrong priorities on spending. That just about sums up the Government's Exchequer position in the first half of the year.
Overall, tax revenue in June still exceeded expectations by some €100 million. In the year to June, the overshoot is €1 billion. But it's a wobbly billion, rather than a stable billion. What would a stable billion overshoot look like? Had each of the main eight tax categories contributed proportionately to that €1 billion it would be a bankable billion, a billion worth boasting about. VAT revenues should be about €329 million ahead of schedule, instead of only €10 million ahead as they actually were.
Income tax would be €261 million ahead of schedule, instead of being €41 million behind as they actually were. And instead of being €337 million ahead of schedule, corporation taxes would only have exceeded budget-time expectations by €110 million.
The two other major contributors to the €1 billion - stamp duties and capital gains taxes - would have contributed €80 million and €45 million respectively, instead of the respective and actual €332 million and €217 million.
As Rossa White of Davy Stockbrokers has noted, the initial shine on the Exchequer position is losing its lustre as time goes by.
"By the end of Q1, revenue was up 19 per cent year-on-year. But that growth rate has moderated to 13 per cent."
And as overall revenue growth continues to slow, it is getting worse, not better. The numbers for the month of June alone say it all. Capital gains tax receipts rose that month by 133 per cent, while corporation taxes actually fell by 26.6 per cent. Stamp duty receipts rose by 53 per cent, while VAT receipts fell by 9 per cent. Capital acquisition tax receipts rose by 25.3 per cent, while excise duties fell by 3.9 per cent.
Ulster Bank chief economist Pat McArdle made an interesting observation in relation to income tax developments.
"It is early days yet, but probably fair to say that, again this year, the tax receipts are not reflecting the growth in jobs that is occurring," he said yesterday.
Now income tax receipts in the first half of the year were bang on target - only €41 million less than the €5.254 million expected at budget time. But compared to budget time forecasts, there are now 30,000 more people working in the economy than expected. So income tax receipts should be considerably ahead of schedule, not slightly behind.
The spending situation isn't much more reassuring. Current expenditure rose by 9.5 per cent in the year to June. Compared with a 2.9 per cent rise in capital expenditure, the figure clearly suggests that political, rather than economic priorities are driving spending policy.
This is a pity. Once-off windfall gains - which is what the Government's current tax position represents - should be put back into the economy in the form of infrastructure, rather than being frittered away on current spending.
