The following statement on the end-March 2012 Exchequer Returns was issued today (Tuesday, 3rd April 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-March Returns, the Ministers stated:
“The end-Quarter 1 returns offer the first opportunity to take stock on progress towards meeting the fiscal targets set out in Budget 2012. Today’s figures, which build upon the strong finish to 2011, highlight the significant progress that has been made in restoring stability to the public finances. Stability is key to jobs and growth and today’s returns give a positive, real time assessment, on the continued progress in 2012 and highlight the robustness of Budget 2012 budgetary forecasts. These figures illustrate that we are on target to reduce our General Government deficit to 8.6% of GDP this year.
Meeting, and in many cases exceeding, our targets under the Programme has generated a renewed confidence internationally in Ireland and this renewed confidence is translating into foreign direct investment and narrowing bond yields. The Government’s priority is to continue to translate this international confidence into future investment and jobs at home and to bring about renewed economic prosperity. We are well aware that significant future consolidation will be required, but we are making progress. We have again met the end-quarter Exchequer primary balance target set as part of the EU/IMF Programme, the sixth consecutive such target to be achieved.”
With regard to the performance of tax revenues, Minister Noonan stated:
“The tax figures for Quarter 1 2012 show a strong start to the year and highlight the robust nature of the Budget 2012 tax forecasts. A number of new measures were introduced in Budget 2012 including the VAT measures and the removal of over 330,000 from the charge to the USC. Given these policy changes and the continued economic uncertainty, the strong performance of VAT and Income Tax is welcome, particularly when no income tax increases were introduced in Budget 2012. Tax revenue returned to growth in 2011 for the first time since 2007 and excluding some technical adjustments that have positively impacted on tax revenues, taxes are up an estimated €758 million (10.1%) year-on-year and are €351 (4.4%) million ahead of profile in the first quarter of 2012. This is a welcome development as we strive to reduce further the deficit in our public finances”.
Commenting on voted expenditure in the first quarter of 2012 Minister Howlin stated:
“Excluding technical adjustments, net voted expenditure is showing some pressures of just over 2½% against profile, mainly in the Health and Social Protections areas. I am confident that all expenditure will be actively managed within agreed limits and I will be stressing upon my colleagues the importance of adhering to the 2012 spending targets, as we did in 2011”.
Notes for Editors
Tax Revenue
· Tax revenues in the first quarter of 2012 totalled €8,722 million, an increase of €1,216 million (16.2%) on the same period in 2011. Tax revenues were €809 million (10.2%) ahead of profile at end-March. However, there are two important factors which need to be borne in mind when assessing the performance of tax revenues so far this year.
· The first relates to corporation tax. As previously outlined, €251 million in corporation tax receipts which were originally due for payment in December 2011 were not received into the Exchequer account until January. As such they did not form part of the original Budget 2012 estimate of corporation tax and therefore did not form part of the published profile. That said corporation tax was ahead of target at end-March even after allowance is made for this factor. A contributory factor is a lower than expected level of repayments to companies. However, it is expected that some of these repayments will be made in the coming months with a consequential negative impact on collection in those months.
· Secondly, income tax was up €739 million (25.8%) year-on-year and €321 million (9.8%) ahead of target at end-March 2012. A large part of this over performance compared to profile is the result of a technical reclassification of receipts from employers which they had previously returned as PRSI. This issue was identified in the context of reporting on the end-February Exchequer Returns. Adjusting for this reclassification it is estimated that income tax was around 3½% ahead of target at end-March.
· VAT receipts in the month of March, the first to reflect directly the impact of the Budget 2012 2 per cent standard VAT rate increase (as receipts in March relate to January/February activity) were €128 million better than planned. VAT is €101 million (3.2%) ahead of target cumulatively at end-Quarter 1 and €182 million (5.8%) up on the same period in 2011.
· Excise duties disappointed a little in March, recording a €28 million shortfall in the month and a €42 million (4.1%) shortfall in the first quarter of the year. They are also slightly down (€24 million) on a year-on-year basis.
· Each of the four smaller tax-heads – stamps, CGT, CAT and customs – is generally performing close to profile at this point in the year.
· Adjusting for the corporation tax and income tax issues referred to above, it is estimated that aggregate tax revenues are up just over 10% year-on-year and some 4.4% ahead of profile at end-March.
Voted Expenditure
· Overall net voted expenditure at end-March, at €11,624 million, was €586 million (5.3%) up year-on-year and €501 million (4.5%) ahead of profile. It is important to bear in mind however that the income tax/PRSI reclassification issue is impacting the year-on-year growth rate and is responsible for a little under half of the excess spend over profile in Quarter 1. Adjusting for this, net voted expenditure is 2.6% ahead of target at end-March.
· Net voted current expenditure, at €11,093 million at end-March, was up €649 million (6.2%) year-on-year and €533 million (5.0%) ahead of profile due largely to overspends in the Department of Social Protection (caused in part by the income tax/PRSI reclassification issue) and the Health Vote Group. The net voted current expenditure of the majority of the other Vote Groups is below profile at end-March.
· Net voted capital expenditure at end-March, at €531 million, was €32 million (5.6%) below expectations €63 million (10.6%) down year-on-year.
Debt Servicing
· Exchequer debt servicing costs, at €2,364 million to end-March 2012 were €70 million less than profiled. They were however €1,516 million higher year-on-year. There are two specific factors influencing the year-on-year rate of increase. These are:
Ø Timing of the Sinking Fund payment – in 2011 this payment took place in November to coincide with a Government bond maturity whereas this year it took place in March, also to coincide with a Government bond maturity.
Ø Some €577 million was used from the Capital Services Redemption Account (CSRA) for debt servicing purposes in the first quarter of 2011. Expenditure from the CSRA does not impact the Exchequer.
· On a like-for-like basis therefore debt servicing costs were up €293 million year-on-year at end-March.
Exchequer Balance
· The Exchequer deficit at end-March 2012 was €4,263 million compared to €7,066 million in the same period last year. Non-voted capital expenditure is down significantly because the payment in respect of the Promissory Note to IBRC was not part of Exchequer expenditure at end-March 2012 as it was in the first quarter of 2011. Increased tax and non-tax 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-March 2012 Exchequer primary balance (EPB), which is the Exchequer balance excluding Exchequer debt interest payments, of –€7.5 billion was set.
· Under the terms of the TMU the EPB is adjusted in the event of any over/under-performance in Exchequer tax revenues and PRSI receipts compared to the TMU estimate. Exchequer tax revenues and PRSI receipts amounted to a combined €10.3 billion at end-March 2012, which was €0.6 billion higher than the TMU target. This is the “Revenue Adjuster”.
· This means that the EPB target was tightened to –€6.9 billion (see table below). The actual EPB at end-March 2012 was –€2.6 billion, meaning the target set as part of the EU/IMF Programme was achieved by a very significant margin. The extent of the margin is made greater by the fact that the scheduled Promissory Note cash payment to IBRC did not take place by end-March as was originally expected and as was allowed for in the end-March TMU EPB target. If the Promissory Note cash payment had taken place as originally planned, the end-March EPB would have been –€5.7 billion so the target would still have been achieved. Adherence to the target will be confirmed with officials from the European Commission, ECB and IMF during the forthcoming review mission.
End-March 2012 (€
billion) TMU
Target Revenue
Adjuster Adjusted
Target Outturn
Exchequer Primary Balance -7.5 +0.6 -6.9 -2.6*
*EPB outturn would have been -€5.7 billion if Promissory Note cash payment had happened as originally planned.