THE UNIVERSAL social charge and the pension levy boosted the State’s tax take by €2.3 billion to €34 billion in 2011, but the Department of Finance conceded yesterday that revenues fell slightly short of their target.
The State ended the year almost €25 billion in the red, compared with €18.7 billion last year. The figure included a €9.5 billion bill for recapitalising the banks.
The final tax take of almost €34.3 billion was €873 million short of the €34.9 billion target set in Budget 2011, according to the December exchequer returns, which the Department of Finance published yesterday. Michael McGrath, assistant secretary at the department, said the additional €2.3 billion raised during the year included revenue from two extra taxes.
The first was the universal social charge, imposed on workers’ pay packets in Budget 2011. The second was the stamp duty levy on pensions, which the Government raised to pay for a jobs initiative. Income tax receipts were €500 million short of their €14.125 billion target. VAT generated €9.7 billion, €500 million shy of the €10.2 billion target set in Budget 2011.
The dip in VAT was down to slowing consumer spending, which accounted for almost €375 million, and a reduction in some rates to 9 per cent from 12 per cent in July, which cost €125 million. Mr McGrath said this would have no impact on Budget 2012’s VAT targets.
Corporation tax – charged on companies’ profits – realised €3.78 billion, just over €200 million less than the €4 billion anticipated. The exchequer deficit hit €24.9 billion in 2011, from €18.7 billion the previous year. The department said the €6.2 billion increase was due to recapitalising the banks.
During the year, the State handed over €3.1 billion in promissory notes to the Republic’s financial institutions. On top of that, following the stress-testing exercise in July, it made once-off payments of €7.6 billion to recapitalise the banks. The exchequer also received €1 billion for the sale of part of the State’s shareholding in Bank of Ireland, leaving the net cost of shoring up the banks at €9.7 billion. Excluding this cost, the exchequer deficit fell by €2.75 billion during the year, which Mr McGrath said was a positive development.
Net-voted spending, the money spent by Government departments, was down over €700 million at €45.7 million. Mr McGrath said the State achieved the targets set out in the bailout deal agreed with the troika. They are to carry out their latest review of the Republic’s finances next week.
Alan McQuaid, chief economist with Bloxham Stockbrokers, said the real question facing the Government is whether it can achieve this year’s budget targets, including an exchequer deficit of €18 billion. He warned it was difficult given the uncertainties facing the global economy. However, he said that even if the targets were not achieved, further austerity measures would hamper growth.
Peter Vale, partner with Grant Thornton, said it would be “interesting” to see if the Government reaches its €10 billion VAT target this year.
“It is worth noting that income tax rates have increased steadily in recent years but the impact on overall income tax receipts has been marginal,” he said. “This may be the case with future VAT revenues as lower spending is offset by the higher VAT rate.”
