The following statement on the end-June 2012 Exchequer Returns was issued today (Tuesday, 3rd July 2012) by the Minister for Finance, Mr. Michael Noonan, T.D. and the Minister for Public Expenditure and Reform, Mr. Brendan Howlin, T.D.
Commenting on the end-June Returns, Minister Noonan and Minister Howlin stated:
“The Exchequer Returns for the first six months of the year give a clear indication of the progress that has been made in restoring order to the public finances and we are confident that the 8.6% of GDP General Government deficit target will be achieved.
The Government remains committed to achieving the 3% of GDP deficit target in 2015 and we will continue with our strong implementation of our EU/IMF Programme. In this regard it is important to point out that for the seventh successive end-quarter we have met the Exchequer primary balance target set as part of the Programme.
The announcement following last week’s EU summit in Brussels shows that there is widespread recognition for the measures this country has implemented and the significant sacrifices that Irish people have taken to bring our public finances under control.
Restoring sustainability to our public finances continues to be a key element of our recovery and the Returns today reaffirm our commitment to narrowing the gap between our income and expenditure. Our approach is working and the announcement today that the NTMA is resuming Treasury Bill auctions later this week highlights the significant improvement in market sentiment towards Ireland since this Government has come to office. ”
With regard to the performance of tax revenues, Minister Noonan stated:
“Today’s figures highlight that taxes continue to perform well and overall are just over €500 million or 3.1% ahead of profile for the year to date. Encouragingly, three of our “big four” sources of tax revenue – corporation tax, income tax and VAT – continue to perform ahead of profile. The strong performance of income tax is especially noteworthy given that in Budget 2012 we introduced changes which removed over 333,000 low income earners from the universal social charge and income tax rates remained unchanged. The fact that VAT receipts are almost exactly in line with profile is evidence of the robustness of the estimate for the first half of the year.
There are significant targets to meet in the second half of the year, but tax revenue is on an upward trajectory and at this point I am confident that our overall tax revenue target for 2012 will be achieved”.
Commenting on voted expenditure in the period to end-June 2012 Minister Howlin stated:
“Departmental expenditure is less than 1% ahead of target at end-June and it is encouraging that the majority of Vote Groups are managing spending within the limits set out. It is the case however that spending pressures are evident. Given the importance of meeting our budgetary targets again this year, I will continue to stress to my Cabinet colleagues the need to adhere to the 2012 spending targets, as was done last year so that overall aggregate expenditure can be brought more in line with profile in the second half of the year.”
ENDS
3rd July 2012
Notes for Editors
Tax Revenue
· Tax revenues in the period to end-June, at €17,014 million, are €507 million (3.1%) ahead of profile and an estimated 8.3% ahead of the same period in 2011 on an underlying basis[1]. Three of the “big four” sources of tax revenue are ahead of expectations at the half-way point in the year with the surplus compared to target being driven primarily by the performance of corporation tax and income tax.
· Corporation tax is €274 million (16.1%) ahead of profile in the period to end-June. The monthly corporation tax target in June is the second largest of the year and receipts in the month were €108 million better than expected. While acknowledging that November is the biggest month of the year for corporation tax collection, the surplus in the year to date represents a strong performance.
· Income tax is €215 million (3.1%) ahead of profile at the half-way point in the year. It is up an estimated 13½% year-on-year on an underlying basis. Income tax receipts have been consistently ahead of monthly targets this year. This is another positive development.
· At end-June, VAT receipts are €29 million (0.6%) better than planned and are €114 million (2.2%) up on the same period in 2011..
· Excises were almost exactly on target in June and are now just €35 million (1.6%) below profile cumulatively. They are up marginally (€10 million or 0.4%) on end-June 2011.
· Taken together, the four smaller tax-heads – stamps, CGT, CAT and customs – are exactly in line with expectations at this point in the year although the significant receipts from stamp duties, CGT and CAT are not profiled for collection until later in the year.
· All in all, the performance of tax revenues in the first half of the year is encouraging and the Department of Finance is of the view that the aggregate April 2012 SPU tax revenue estimate of €36,375 million is achievable.�
Voted Expenditure
· Overall gross Departmental expenditure at end-June is less than €200 million ahead of target. However net voted expenditure is €386 million (1.8%) ahead of profile. Around half of this overspend is related to a shortfall in PRSI receipts.
· Net voted current expenditure, at €21,330 million at end-June, is 2.3% ahead of profile due largely to overspends in the Department of Social Protection (caused in part by the PRSI shortfall) and the Health Vote Group. While the net voted current expenditure of the majority of the other Vote Groups is in line with or below profile at end-June, the pressures in the Social Protection and Health.
· Net voted capital expenditure at end-June, at €1,092 million, is €88 million (7.4%) below expectations and €258 million (19.1%) down year-on-year with the main underspends on the Environment and Jobs, Enterprise & Innovation Votes.
Debt Servicing
· Exchequer debt servicing costs, at €4,511 million to end-June 2012 are €118 million (2.5%) less than the profile published in early February. They are however some €2 billion up year-on-year. There are two specific factors influencing this rate of increase:
Ø Timing of the Sinking Fund payment – in 2011 it took place in November to coincide with a Government bond maturity whereas this year it took place in March.
Ø A net €524 million was used from the Capital Services Redemption Account (CSRA) for debt servicing purposes in the first half of 2011. Expenditure from the CSRA does not impact the Exchequer.
· On a like-for-like basis therefore debt servicing costs are up approximately €0.8 billion year-on-year at end-June.
Exchequer Balance
· The Exchequer deficit at end-June 2012 is €9,443 million compared to €10,828 million in the same period last year. The main reason for the €1.4 billion improvement in the deficit is that the €3.06 billion payment in respect of the IBRC Promissory Note is not part of the Exchequer deficit in 2012 as it was last year, as this year’s payment was settled with a Government bond. Increased tax, non-tax and capital revenues were offset by higher debt servicing costs and higher net voted current expenditure.
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-June 2012 Exchequer primary balance (EPB) – the Exchequer balance excluding Exchequer debt interest expenditure – of –€9.0 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 completes the recapitalisation of Irish Life and Permanent.
· Exchequer tax revenues and gross PRSI receipts amounted to a combined €20.4 billion at end-June 2012, which is €0.7 billion higher than the TMU target of €19.7 billion.
· As shown in the table below, the EPB target is therefore adjusted to –€9.6 billion. The EPB[2] at end-June 2012 is –€8.7 billion, meaning the target set has been achieved. Adherence to the target will be confirmed during the current Programme review mission.
End-June 2012 (€ billion) TMU
Target Banking
Adjuster Revenue
Adjuster Adjusted
Target Outturn
EPB -9.0 -1.3 +0.7 -9.6 -8.7
[1] Excluding (i) corporation tax receipts expected in December 2011 but which did not reach the Exchequer until January 2012 and (ii) a technical reclassification to income tax this year of receipts previously returned as PRSI
2 As the TMU EPB target includes the
€3.06 billion payment in respect of the IBRC Promissory Note, for comparability the EPB outturn as referred to above also includes it, even though settlement of this payment was through a Government bond. The actual EPB at end-June, as per the Exchequer Statement is -€5.7 billion