The Government's budgetary position remains ahead of target, according to figures for the first three quarters of the year, published yesterday by the Department of Finance, writes Marc Coleman, Economics Editor.
According to the exchequer returns for September, tax revenues were €1 billion ahead of budgetary targets. These data follow the release last week of disappointing figures for economic growth in the second quarter of the year, implying some rebound in the third quarter.
However, the performance of different tax categories was mixed, as disappointing corporation and income tax returns were offset by buoyant stamp duties and VAT.
Due to overall buoyancy an exchequer deficit of €1,123 million was recorded for the period, compared with an expected deficit of €2,988 million for the whole year. The deficit of capital expenditure over capital revenue amounted to just €3,361 million for the first three quarters, compared with a budgeted deficit of €7,080 for the year.
Excluding the impact of so-called capital carryover effects, where unspent money is carried forward from one year to the next, capital spending rose by just 3.2 per cent in the year to September, compared with a revised estimate of 12.5 per cent for the year.
Tom Heffernan, principal officer in the public expenditure division of the department, said that difficulties concerning the acquisition of land were affecting capital spending across a range of projects.
Corporation tax revenues in the year to September were 10 per cent lower than expected. The department said timing factors accounted for approximately one-quarter of the shortfall, but saw "no particular reason" for the remainder.
Income tax growth was broadly in line with budget time targets when adjusted for gains arising from the Revenue Commissioners, according to the department.
The influence of the housing market was evident as revenues from stamp duty rose by 30 per cent in the year to September, exceeding budgetary expectations by 22 per cent.
VAT receipts also grew strongly, by 12 per cent in the period, 4 per cent ahead of target. According to department officials growth in the retail sector had remained strong, with no evidence to date of a so-called "Hobbs factor" negatively affecting VAT returns.
Commenting on the figures Finance Minister Brian Cowen said that public finances remained in a sound position. "Tax revenues are well ahead of profile. This includes extra monies this year from Revenue's special investigations. Public expenditure in 2005 is expected to be broadly in line with estimates."
However, Fine Gael spokesman Richard Bruton said: "The Government has pocketed windfall gains from rising oil prices, buoyant car sales and the strong housing market. On VAT alone, Irish households pay €1,500 more than the typical EU household."
In a reference to last week's annual report of the Comptroller and Auditor General, Mr Bruton linked tax revenue buoyancy to the issue of waste in Government expenditure.
"What really rankles the ordinary family who has no choice but to pay up, is the litany of wasted spending, which has again been catalogued in the annual report of the Comptroller and Auditor General," he said.
"Once again the Government has shown itself incapable of delivering its projected infrastructure projects. It is four years since the Taoiseach has promised a national strategic infrastructure Bill to speed up the delivery of key infrastructures. It will be years before we see this appear," said Mr Bruton.
Department officials said the final exchequer position was likely to benefit from the traditionally stronger tax intake in the final quarter of the year.
"One-third of the tax take comes in the final quarter of the year," said Barra Ó Murchadha, principal officer in the budget and economic division.
Officials also said the cost of rebates of nursing home charges was unlikely to impact on this year's budgetary out-turn.