Good Exchequer Performance: Taxes Up; Spending on Target
The Minister for Finance, Mr. Michael Noonan, T.D. and the Minister for Public Expenditure and Reform, Mr. Brendan Howlin, T.D commented on the end December Exchequer returns issued today, saying;
“The Exchequer outturn for 2012 highlights the continued improvement we are making in the public finances. Tax revenue grew strongly in 2012 and indeed outperformed expectation with underlying Departmental spending coming in on target.
We continue to meet all of our budgetary targets including the end-December Exchequer primary balance and Central Government net debt targets that are part of the EU/IMF Programme. For each of the nine quarters since the Programme commenced in late 2010, we have successfully met all of these targets.
The 2012 General Government deficit target of 8.6 per cent of GDP will, on the basis of these Exchequer figures, also be achieved by a significant margin.
Notwithstanding the significant progress we are making, we cannot lose sight of the fact that we continue to spend more than we collect in revenue. The Exchequer deficit, at close to €15 billion in 2012, is too large and the Government remains committed to reducing it further in the coming years. The measures introduced in Budget 2013 are the latest step in that regard. Stable public finances are an essential prerequisite to economic growth and job creation.
Ireland is making strong, consistent progress towards emerging from the Programme and today’s figures show that the measures we are implementing to close the deficit in our public finances are working. Our recovery is on track.”
Commenting on voted expenditure in 2012 Minister Howlin stated:
“Overall, expenditure was on target, with Ministers and their Departments working hard so that this Government can continue to meet its fiscal objectives, while delivering the quality services that the public needs and deserves.”
Minister Noonan stated:
“Tax revenues performed very well in 2012, recording a small surplus against profile for the year as a whole. Taxes grew significantly last year compared to 2011. Encouragingly, after some weakness in recent months, taxes were particularly strong in the month of December. This is a positive development as we start the New Year. It gives me further confidence that the Budget tax revenue target for 2013 is both robust and achievable.”
The two Ministers concluded:
There are clear signs that overall economic confidence is returning. Retail sales have recorded strong growth over recent months and the anecdotal reports from the Christmas – New Year period are positive. These and other metrics, such as export data, illustrate that the Government's plan for economic recovery is working. We know that there are many difficulties that remain for people but we are committed to implementing the budget measures to ensure that we build on these positive signs."
Notes for Editors
Tax Revenue
· Exchequer tax revenue in 2012, at €36,646 million, was €2,619 million (7.7%) up on 2011 and €271 million (0.7%) ahead of profile. Adjusting for delayed corporation tax receipts from December 2011 and a PRSI/income tax reclassification issue in 2012, aggregate tax revenue grew an estimated 5.3% in 2012.
· Of the four main sources of tax revenue, two – VAT and corporation tax – recorded surplus against target in 2012. The other two – income tax and excise duties – recorded shortfalls. In light of much better than expected receipts in the month of December however, these shortfalls were not as significant as had been expected when Budget 2013 was published in early December.
· December’s tax receipts surprised on the upside, coming in €440 million above profile. In light of this, tax revenues were €271 million (0.7%) ahead of target for the year as a whole. Budget 2013 in early December had estimated a €210 million shortfall.
· VAT recorded a €176 million (1.8%) surplus in 2012, a very positive performance. Receipts grew 4.4% compared to 2011, largely on foot of the increase in the standard VAT rate, from 21% to 23%, intrdocued in Budget 2012.
· Corporation tax was significantly above profile in the month of December owing to a combination of higher than expected payments, specifically from two particular large payers, as well as lower than expected repayments. For the year as a whole corporation tax recorded a €196 million (4.9%) surplus against target. On an adjusted basis, receipts were up 5.1% compared to 2011.
· Income tax and excise duties also recorded large surpluses in December, reversing the trend seen in both in recent months. For the year as a whole however, both tax-heads fell short of their respective targets. Income tax was €124 million (0.8%) lower than profiled while excise duty was €108 million (2.2%) below expectations.
· It is worth noting however that notwithstanding the shortfall against target, income tax grew an estimated 7.8% in 2012, even after adjusting for the PRSI/income tax reclassification issue. This is a strong rate of growth, particularly when there were no income tax increases introduced in Budget 2012.
· Of the four smaller tax-heads, three performed above expectations, significantly so in the case of both stamp duties and capital gains tax (CGT). Capital acquisitions tax (CAT) receipts were a little below target however in 2012.
Voted Expenditure
· Expenditure for 2012 is in line with target. The underlying Departmental expenditure position has been kept on target for the year as a whole: +0.4%.
· The majority of Departments have come in at or below profile.
· 5% shortfall in PRSI receipts is driving the net voted expenditure increase of 1.2%.
· Pressures on the health and social welfare areas offset to a large extent by savings in other areas.
· This continues the strong trend of expenditure control
· Adjusting for PRSI, the difference between the underlying net expenditure outturn and profile is as follows:
Difference
Year Profile
€bn Outturn*
€bn €bn (%)
2010 46.3 46.8 -0.2 -0.5%
2011 46.2 46.1 0.0 -0.1%
2012 44.4 44.6 0.2 0.4%
*End-December Exchequer Voted expenditure, adjusted for PRSI over/under performance
· Total net voted expenditure, at €44,950 million in 2012 was €521 million (1.2%) ahead of profile. In year-on-year terms, aggregate net voted expenditure was €760 million (1.7%) lower than in 2011.
· Adjusting for a €356 million shortfall in PRSI receipts, net voted expenditure was just €165 million (0.4%) ahead of target. This was due almost exclusively to pressures in the Health and Social Protection areas.
· Net voted current expenditure, at €41,461 million in 2012 was €666 million (1.6%) ahead of profile on a headline basis. Excluding the PRSI shortfall, the overspend was €310 million (0.8%). The most significant overspends were in the Health and Social Protection Votes. �
· Net voted capital expenditure in 2012, at €3,489 million was €145 million (4%) below expectations and €801 million (18.7%) lower than in 2011. The main underspends against profile were on the Environment and Transport Vote Groups.
· This €3,489 million Exchequer capital spend includes €107 million in capital carryover, which will be available for Departments to spend into 2013 but is included as Exchequer expenditure in 2012.
Debt Servicing
· Exchequer national debt servicing costs, at €6,467 million in 2012 were €497 million (7.1%) less than the profile published at end-October, a profile which was consistent with the April 2012 Stability Programme Update (SPU) Exchequer debt servicing forecast.
· Factoring in the €600 million in debt servicing expenditure funded from the Capital Services Redemption Account (CSRA) in 2011, on a like-for-like basis debt servicing costs were up approximately €1.1 billion (20%) in 2012 compared to 2011. Expenditure from the CSRA is not reflected in the Exchequer Statement.
Exchequer Balance
· The Exchequer deficit in 2012 was €14,891 million compared to €24,918 million in 2011. The main driver behind the large decrease was lower non-voted capital expenditure due to (i) settlement of the 2012 IBRC Promissory Note payment with a government bond and (ii) the fact that the July 2011 banking recapitalisation payments were not repeated in 2012.
· Having adjusted for certain banking related payments and receipts, the Exchequer deficit in 2012 was over €1.4 billion or 9% lower than the deficit in 2011. The corresponding Exchequer primary deficit (the deficit excluding interest expenditure) was over €2.5 billion or 24% lower.
EU/IMF Programme Exchequer Primary Balance Target
· As part of the quantitative performance criteria of the Technical Memorandum of Understanding (TMU) of the EU/IMF Programme, a target
for the end-December 2012 Exchequer primary balance (EPB) – the Exchequer balance excluding Exchequer debt interest expenditure – of –€11.2 billion was set.
· Under the terms of the TMU the EPB is adjusted for:
(i) payments for bank recapitalisation and credit union funding, and,
(ii) any over/under-performance in Exchequer tax revenues and gross PRSI receipts combined compared to the TMU estimate.
· In June, there was a €1.3 billion Exchequer payment in respect of the acquisition of Irish Life Limited which completed the recapitalisation of Irish Life and Permanent. In December there was a €250 million Exchequer contribution to the Credit Union fund.�
· Exchequer tax revenues and gross PRSI receipts amounted to a combined €43.7 billion in 2012, which is €0.4 billion lower than the TMU estimate of €44.1 billion.
· As shown in the table below, the EPB target is therefore adjusted to –€13.1 billion. The equivalent EPB[1] in 2012 was –€12.3 billion, meaning the target was achieved. This is the ninth consecutive end-quarter EPB target to have been achieved since the Programme commenced in late 2010. Adherence to the target will be confirmed during the forthcoming Programme review mission.
End-December 2012
(€ billion) TMU
Target Banking/Credit Union
Adjuster Revenue
Adjuster Adjusted
Target Outturn
EPB -11.2 -1.55 -0.4 -13.1 -12.3