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Irish Tax Revenues Still On The Up

by Jason Gorringe,, London

06 October 2011

Ireland's latest economic figures make for largely positive reading, with tax revenues at end-September up 8.7% on last year, an achievement attributed to the new universal social charge and the introduction of the controversial pension funds levy.

The end-September Exchequer Returns show that tax revenues, at EUR24.1bn (USD32.1bn), are EUR1.9bn (8.7%) higher than in the same period last year. Tax revenues for the month of September were EUR160m (0.7%) above target, but the government says this is largely due to beneficial timing factors relating to income tax and also the receipts from the Pension Levy.

The Department of Finance points to the increase in income tax receipts by 25%, with the government taking EUR9.3bn. Excluding the beneficial impact of earlier than expected Deposit Interest Retention Tax payments in April and July, which were originally profiled for collection in October, income tax is just 0.9% below target after the first nine months of the year. Given the very large target set in the Budget and the introduction of such significant revenue raising measures, this is an encouraging performance, the Department has said.

Stamp duty receipts were EUR384m above target, with year-on-year figures up by 58.8% and total receipts reaching EUR1.1bn. As part of a Jobs Initiative package unveiled by the Finance Minister earlier in the year, a 0.6% tax is now charged on all assets under management of funded pension schemes and personal pension plans established in Ireland. The move continues to attract widespread criticism, with the chief executive of the country's largest pension company Irish Life recently warning of a crisis of confidence in the government's pensions policy. Nonetheless, the receipts from the levy are held by the Department to have had a positive effect on stamp duty revenues, with an extra EUR457m raked in as a result. These figures were not included in the original targets for stamp duty, published in early February.

Excise duties, the third biggest source of tax revenue, are EUR77m (2.3%) below target so far in 2011. However, the government stresses that it should be noted that this is not a true reflection of the position, as there was a delay in the transfer of some EUR112m in receipts into the Exchequer account. These receipts were not received in time to benefit the end-September figures.

Value-added tax (VAT) recorded a shortfall against target in the period to end-September of EUR300m (3.6%) with a shortfall in the month of September of EUR71m. The government admits that this is disappointing, particularly as it is the fourth consecutive month that VAT has recorded a shortfall.

Finance Minister Michael Noonan commented: “The Exchequer deficit in the period to end-September is over EUR3bn lower than it was in the same period last year, excluding the impact of banking related expenditure. This shows that real progress is being made in returning our public finances to a more sustainable position. The Exchequer Primary Balance target set for end-September as part of the Joint EU/IMF Programme of Financial Support was also met, which is to be welcomed. Tax receipts in the period to end-September were 8.7% above the same period in 2010 and slightly ahead of expectations. Although the minor surplus is due to some favourable timing factors and receipts from the Pension Levy introduced to fund the Jobs Initiative, it is encouraging that overall tax revenue is growing again. Individual tax-head performance has been mixed. VAT receipts are weaker than expected but income tax is performing well."

In a joint statement with Brendan Howlin, the Minister for Public Expenditure and Reform, Noonan concluded: “Our economy has returned to growth and notwithstanding the impact of banking related expenditure on the budgetary numbers, the public finances are clearly moving in the right direction. We are on track to meet budgetary targets for the year as a whole. We have secured very welcome reductions in the interest rates applying to funding from the Joint EU/IMF Programme which will be of great assistance in helping to return our public finances to health. Nonetheless, there can be no room for complacency. The deficit in the public finances remains large, despite the recent improvements, and it is crucial that we continue to reduce the gap between our revenues and expenditure in the coming years."

TAGS: tax | economics | pensions | value added tax (VAT) | Ireland | fiscal policy | budget | corporation tax | excise duty | stamp duty | social security | tax reform | individual income tax

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