Wednesday, April 4, 2012

First Quarter Exchequer Returns

The Department of Finance have released the end-March Exchequer Returns.  The relevant documents are:

The Department have improved their presentation of the tax receipts data and much of the analysis that was previously provided here is now included in the release.  This is a welcome development.

Another welcome development is the new Department of Finance Databank which gives monthly Exchequer tax receipts back to 1984.  Expenditure figures are provided in the Department of Public Expenditure and Reform Databank which has been available for some time.

On the whole, the results seem slightly positive.  Tax revenue is up on the year but a lot of that is due to delayed receipts from 2011 and some reclassifying issues between Income Tax and PRSI.  Even accounting for these, tax revenue seems to be performing as expected though there is an unusual dichotomy between the performance of VAT (up) and Excise Duty (down).

The Current Account Balance is a useful indicator of the performance of the public finances.  On first glance this would appear to be getting worse.  In the first three months of 2011 there was a Current Budget Deficit of €4,177 million.  So far this year we have accumulated a Current Budget Deficit of €4,918 million.

There are three factors to note before jumping to the conclusion that the Current Deficit is continuing to deteriorate:

  1. The Sinking Fund Contribution of €646 million has already been made for 2012.  In 2011 this transfer of €683 million from the Current to Capital Account did not take place until November.  A year-on-year comparison is unfair on 2012 because it includes a payment that was not made by March of last year.
  2. Last year the debt interest cost for the first quarter of the year was €1,425 million, but €577 million of that was paid from the Capital Services Redemption Account with the remaining €848 million coming from the Exchequer Account.  In 2012 all the debt interest bill of €1,658 million was paid from the Exchequer Account.
  3. This year’s receipts include €231 million of Corporation Tax which should have been collected in 2011 but a delay meant it was instead included in the January 2012 receipts.

To account for these we will subtract the Sinking Fund contribution from the 2012 deficit, add the interest paid from the CSRA to the 2011 deficit and subtract the delayed Corporation Tax receipts that have been added to this year’s revenue..

That means the comparison is between a deficit of €4,754 in 2011 and one of €4,503 million.  So far in 2012, the Current Budget Deficit is about €250 million better than it was at the same time last year.  It is not clear how much of this is down to timing and whether it will be continued into the second quarter, but it is positive that the current budget deficit is smaller (even if it is only marginally so).

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