Exchequer Returns for February

Here‘s a link to the exchequer returns for February and here‘s the release comparing tax outcomes to the targets set out in the budget. (Here are the full set of targets for the year.) Tax revenues are 1.3% behind target for the year.

If replicated over the year, that would imply a shortfall for the year of €310 million which isn’t such a big deal. That said—and I don’t claim to be an expert on the month-to-month stuff and I know lots of this stuff is really noisy—income tax receipts being down 6% relative to target seem like bad news, More generally, I’m starting to get worried at how we keep falling short of targets.

The GDP and unemployment statistics from last year showed the really steep declines in activity ended in the second quarter. I’m looking for an unwinding of the huge year-over-year declines by April or so. If that doesn’t happen, we could end up pretty far off target.

25 replies on “Exchequer Returns for February”

@ Karl Whelan,

I don’t know if many people read this – I was reading this article of Dermot O’Leary, chief economist with Goodbodys on bus home this evening – it is a valid piece, especially regarding the month-to-month behavioural aspects of the Irish economy.


I really want to tear into the same article though, in criticism over the philosophy of Irish households in debt for 170% of disposable income, compared with circa 100% in France/Germany. The volatility that exposes the 2 million or so working population in Ireland to, is un-real, I think. It goes from €10 billion per annum for the country with low interest rates, down to €5 billion per annum with almost zero ECB rate, and now will spring back again – even if ECB leaves it floored, with Greece etc, etc – because the national banks in Ireland’s cost of selling are greater than what they are selling. BOH.

As one who has been involved in budgeting for the guts of 20 years if you can’t get the closest months to the budget process right then then you’re not very good at budgeting.

The tricky bit is predicting 6 months+ out. The assumption in the budget is the drop in income tax and VAT will improve as 2010 progresses So the target for income tax for the year is to be down only 2.6% but it is down 11.8% in the first two months (and that’s with the extra tax from the April 09 budget)

It’s too soon to extrapolate the full year. If I was Minister for Finance I would be holding back expenditure as much as possible until I saw how the year progresses.
Even with the public pay cuts current expenditure is only down €355m in the first 2 months on last year while current income is down over €1b. I would be nervous about the full year based on this but it could turn round.

You would expect deflation to impact expenditure. Businesses I know are renegotiating their annual contracts, cutting costs and deferring expenditure. It doesn’t look like the government does this sort of thing.

I will start by saying that it is very difficult to meaningfully analyze the monthly exchequer statements especially for just 1 month.

But once you look beneath headline the number of just 1.3% behind forecast I think the optimism is quite misplaced.

The 2010 profile was published on 2nd of Feb when the January returns were known so we should just look at the February variances in insolation.

Forecasts for Feb were
Income Tax €891m
VAT €244m
Corporation tax €90m
Excise €344m
Stamps €89m
CGT €30m
CAT €21m
Customs €17m
Total expected revenue for Feb was €1,726m

While the actuals for Feb were
Income Tax €776m
VAT €322m
Corporation tax €66m
Excise €306m
Stamps €72m
CGT €69m
CAT €17m
Customs €15m
Actual revenue for Feb was €1,643m

Income Tax -12.9%
VAT 32.0%
Corporation tax -26.7%
Excise -11.0%
Stamps -19.1%
CGT 130.0%
CAT -19.0%
Customs -11.8%

Total revenue for Feb was 4.8% behind a 30 day old forecast.

I think we will need to see the first VAT returns next month to see where we are heading for the year but as KW says the Income tax figures are worrying.

Given that job losses and pay cuts obviously impact Income Tax receipts and, by extension VAT receipts, is it possible to draw the conclusion that the deflationary policies being pursued by the State (policies that are being used by the Private Sector to pursue their own costs deflation agenda) are causing a negative feedback loop in the State’s exchequer figures?

It is possible to infer that,

But IMO it is more likely that the economy is still contracting due to continuation of the unwinding construction sector and the knock effects this is causing.


There is a rumour that John the Optimist is lolling on the couch in the PR strategy backroom at the FinneFerengi HQ down in Mount Street sipping champagne on ice with a smile on his face post the EU_NaaMaa go_ahead as broad as the Boyne if not as broad as the Golden Gate! Rumours of this fling with Sharah Phelan in Kali-forn_I.A. have been greatly exaggerated – he apparently doesn’t take kindly to PIIGs wearing lipstick …. a bridge too far (-;

On the labour market front, the really steep declines in construction employment seem to have ended with Q2 last year, but the decline in employment in “industry” kept on going at least through Q3. (No Q4 data yet.) There’s more than one driver of employment loss operating here, and just because one of them moderates does not necessarily mean that the other(s) will also do so.

As an fyi…Greece just issued 5bn in 10yr bonds at Bunds +324bps…good demand at pricey levels…


Right on Greece! Up yours to the NY Hedge_Fund cartel – we’re comin attacha! Onto the street went the 300 (-; …………
backed up by a 100 million huns (-;

Is the DoF working with faulty tax elasticities?

The Pre-Budget Report stated that the DoF had expected a 1: 1.1 decline in tax receipts, which was very wide of the mark.

Assuming GNP was unchanged in Q4 2009, total output will have been €131.1bn for the year as a whole. That is €31.1bn below the 2007 peak, a market prices. Over the same period yearly tax receipts will have fallen from €47.2bn to €33bn, a fall of €14.2bn.

It is customary for DoF to assume a tax/GNP ratio in the order of 33%-35%, representing the tax share of national income. But in the last 2 years, the tax share of the decline in GNP has been 45.7%.

Further, the decline in GNP has been 19.2% (assuming an unchanged Q4), while the decline in tax receipts has been 30%, an elasticity of 1.56.

The Irish economy is in a much more fragile state than is generally believed:

Tax Receipts
For me, VAT receipts give the most immediate “pulse” of the economy. The budgetary target is for VAT receipts to slip by 5.4% over the full year compared to 2009 but the cumulative receipts to February are down 13.4% over the equivalent 2009 figures. That is worrying.

ECB Emergency Liquidity Support
Irish banks have been, relative to the size of our economy, the biggest users of the emergency liquidity support which the ECB offers (via national central banks). These facilities allow Irish banks plug a funding gap that they might otherwise have difficulty funding in the interbank market.

The total amount which Irish (retail and mortgage) banks have been drawing down under these facilities had been declining steadily from June (€118bn) to November (€58bn) last year. But since then, this figure has risen sharply again (to €85bn at the end of January). That is also worrying.

Bottom Line
1. The economy is still in a very fragile condition.
2. While NAMA will improve the liquidity position of Irish banks by paying them cash (€54bn was the original estimate) this will be offset by the eventual withdrawal of ECB emergency liquidity support (now €85bn) i.e. based on current figures, the liquidity position of Irish banks would deteriorate based on the balance of NAMA (+€54bn) and withdrawal of ECB funding (-€85bn).
3. This puts more pressure on the state to go for a larger recapitalisation of the Irish banks than it might otherwise have contemplated so that, post-recap, Irish banks are strong enough to raise the funding they require without further help.


I think the point has been well made above that monthly data is too volatile to start reading too much into (though the economy is clearly in a very weak state). However not a great measure of the patients pulse. Retail sales (ex-motor) data show an increase in volume and (what matters more for ultimate tax receipts) value of receiptsf for Jan. Still very low compared to last year, and nothing to get excited about, though trend isn’t as negative as you suggest.

Relying on Dreaded_Estates figures, the CGT and CAT revenues are interesting. It looks like assets are being sold but there are fewer gifts/inheritances than expected.

Do CGT figures being 30% ahead of forecast while stamps are 20% behind forecast suggest heavy selling of companies? Or are we seeing CGT being paid for transactions not yet completed?

It would help if the D of F employed a few Commercially aware Qualified Accountants instead of the 650 Idiots employed there who could not see the wood from the trees. You dont use Capital Receipts to expand the State workforce by 75,000 unless you are an Idiot. So dont be surprised that these people get their Budget figures wrong so often. This lot in a commercial Private Sector company would be fired 3 years ago instead they are mollycoddled to the last while our Debt Burden goes through the roof.


VAT is the only heading that is actually running above the DOF plan at plus 4%. Presumably they knew about the car scrappage scheme. Its income tax that is worrying me at down 5-6% wheras I think the plan was down 3%. What we rally need are daily figures to be able to blog incessantly on the trend in public finances.

As regards your 2nd point on bank recap. I think you are correct. Any notion of recapping to minimum levels and hoping equity grows from there over time should be quickly forgotten. Go to 8% Core Equity/RWA now for the big two and get it over with. Use the LTEV wiggle room, bond buybacks/asset sales/rights issues and convert NAMA prefs to equity. Let the public stake end up where it ends up. Deal then with the negative consequences of nationalisation re funding and governance.

“Let the public stake end up where it ends up.”
Oh no…..that would never do. Much better to allow the banks to sell every single productive asset, then do some fancy dancing on debt-equity swaps, then see if they can give the carcass away for thruppence. All that gets us to regulatory minima, when the govt can say “phew…at least we didnt have to do any of that nasty nationalisation. Anyhow, whats wrong with zombies?”

@Michael Burke

Apart from specific issues in Ireland (where higher income people are often in state protected professions and industries) high elasticity in tax vs output is often a characteristic of what gets ironically called “progressive” taxation.

Higher income is often riskier. Come the recession the higher income people suffer most income loss (in absolute terms) and the tax take is proportionally even more affected since it’s “progressive”.

@Cormac Lucey

Useful …

“3. This puts more pressure on the state to go for a larger recapitalisation of the Irish banks than it might otherwise have contemplated so that, post-recap, Irish banks are strong enough to raise the funding they require without further help.”

er … “strong enough to raise the funding they require without further help.” Dream on! This isn’t a dream – IT’S A NIGHTMARE.

Who’s going to get bonuses for successful sales of assets? Targets met boys, my yacht or yours?

@Brian Lucey,

Ironically, if we nationalise the banks and the property market through NAMA that is exactly what will happen. The buraucrats will sell what can be sold first and then sit on the rubbish until the very end. Its what every underperforming asset manager does, cut the winners & run the losers.

At least if we make a pact with the Devil and leave the lads in Bank Centre in charge,we have some way of salvaging something from the wreckage.

Looking into my crystal ball, the one that all economists deny exists, I see more taxes and higher rates of taxes. I see fewer posts that are facetious.


Coverage from US news papers of the depression that used to be called great. This may give some an idea of the tricks undertaken to keep people from understanding the facts.

@zhou_enlai – “Do CGT figures being 30% ahead of forecast while stamps are 20% behind forecast suggest heavy selling of companies? ”

The dogs on the streets say you’re right. Companies and other business holdings.

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