7/1/2012: Irish Exchequer Results 2011 - Shifting Tax Burde

In the previous 3 posts we focused on Exchequer receipts, total expenditure by relevant department head, and the trends in capital v current spending. In this post, consider the relative incidence of taxation burden.

Over the years of the crisis, several trends became apparent when it comes to the shifting burden of taxes across various heads. These are summarized in the following table and chart:

To summarize these trends, over the years of this crisis,

• Income tax share of total tax revenue has risen from just under 29% in 2007 to almost 41% in 2011.
• VAT share of total tax revenue has fallen, but not as dramatically as one might have expected, declining from 30.7% in 2007 to 29.7% in 2011
• MNCs supply some 50% of the total corporation tax receipts in Ireland. And they are having, allegedly, an exports boom with expatriated profits up (see QNA analysis last month). Yet, despite this (the exports-led recovery thingy) corporation tax receipts are down (see earlier post on tax receipts, linked above) and they are not just down in absolute terms. In 2007-2011 period, share of total revenue accruing to the corporation tax receipts has fallen from 13.5% to 10.3%. So if there is an exports-led recovery underway somewhere, would, please, Minister Noonan show us the proverbial money?

 So on the tax side of equation, the 'austerity' we've been experiencing is a real one - full of pain for households (whose share of total tax payments now stands at around 58% - some 12 percentage points above it levels in 2007) and the real sweet times for the corporates (the ones that are still managing to make profits to pay taxes, that is). This, perhaps, explains why even those working in protected sectors are talking about their biggest losses coming from tax changes.

7/1/2012: Irish Exchequer Results 2011 - Capital v Current Spending Trends

In the previous posts we considered Exchequer results for 2011 for tax receipts and headline expenditure items. In this post we look at the capital and current spending composition breakdown for total spending.

One core assertion that was made in the previous posts is that capital spending carried the main load of Exchequer spending adjustments in 2011. Overall, year on year, total net cumulative voted spending by the Irish state declined 1.6% or €721 million. At the same time, current expenditure went up by 2.2% or €903 million. Capital expenditure dropped 27.4% year on year in 2011 or €1,623 million.

Table below highlights the yearly changes over the crisis period:

The table above clearly shows that while during the crisis Net Voted Current Spending went up by €663 million, capital spending has declined by €4,265 mln on aggregate. The table also shows that despite all the austerity discourse, our Net Current expenditure was rising in 2010 and 2011, while our capital expenditure was declining to compensate for these increases.

In addition, the table highlights the trend that shows current expenditure rising at accelerating rate in 2010 and 2011 and capital expenditure falling at accelerating rate in 2011 relative to 2010.

If capital spending by the state constitutes either a 'Keynesian' stimulus (as claimed by the Governments over the years) or an investment in future productive capacity of our economy (as also claimed by the Governments in the past), we are now into a third consecutive year of bleeding the economy dry.

And the dynamics are best illustrated by referencing to the longer time horizons:

So current expenditure share of total spending by the Government now stands at 90.6%, up from 2010 level of 87.3% and 1998-2002 average share of 82.3%. On the other hand, capital investment share of total Government spending has dropped from 21.7% average for 1998-2002 period to 21.0% in 2008 and to 14.6% in 2010. In 2011 this share declined to below 10.4%.

 Between 2000 and 2010, Irish State invested in new capital stock some €66.26 billion of funds. Assuming 8% combined amortization and depreciation on this stock implies the need for continued gross investment of ca €5.3 billion annually. This means that 2011 Net Capital Spending fell some €1.01 billion short of covering the depletion of the state-financed capital stock.

The above, of course, is a rather crude calculation, since amortization and depreciation are at least in part covered from the current spending and since we use net voted capital spending figure for the capital stock measurements, but it does clearly suggest that current rates of capital investment cannot be sustained in the long term. And hence, much of the savings that have driven our Exchequer deficit improvements to-date are not sustainable either.

5/1/2012: Irish Exchequer Results 2011 - Tax Receipts

Irish Exchequer returns for 2011 are in and there has been much in the line of fireworks celebrating the 'strong' results. Alas, these celebrations are revealing more about the nature of the Exchequer figures analysis deployed by the Government spin doctors than about the real dynamics in tax revenues and spending reforms.

In this post, let's take a look at the tax performance over 2011.

Income tax receipts came in at the grand total of €13.798 billion this year, 22.4% up on 2010 and 16.6% up on 2009. Alas, the gross year on year gain of €2.522 billion achieved in 2011 is accounted for by re-labeling of the former health levy into income tax component. In 2010 the state collected €2.018 billion worth of health levies receipts which were not classified as a tax measure. This year, it was classed as such, and although we do not know just how much of the health levy has been collected, netting out 2010 receipts for this revenue head out of the 2011 tax receipts leaves us with an increase in income tax like-for-like of closer to €500 million year on year. And these net receipts would imply income tax still down on 2009 levels.

Overall, income tax was down €327 million on target set in Budget 2011 - a shortfall of 2.3% - not dramatic, but hardly confidence-instilling. 

The chart below illustrates trends over time, but one has to keep in mind that 2011 figures are gross of USC (and thus Health Levy receipts).

More revealing (as these compare like-for-like) are VAT receipts:

As the chart above illustrates, VAT receipts came in at €9.741 billion in 2011, down 3.57% on 2010 and 8.71% on 2009. Now, we are talking some real numbers here. While income tax 'improvements' were in reality very much marginal, VAT deterioration is very significant. VAT receipts are down 4.8% or €489 million on 2011 target and the receipts are off €360 million on 2010 and €929 million on 2009. VAT receipts are running €4.76 billion behind, compared to 2007 levels. 

Corporation tax is shrinking. Official numbers show Corpo receipts are at €3.52 billion in 2011, down €404 million on 2010. These include €261 million in delayed receipts, so year on year Corpo receipts are down really €143 million. This might look small, but for the economy that is allegedly 'recovering' the dynamic is poor. In percentage terms, Corporation tax receipts are off 10.29% yoy and 9.74% on 2009. Compared to 2007, corporate taxes are down €2.871 billion (disregarding the late receipts).

Relative to target, once December delayed payments are factored in, Corporation tax has fallen short of the projections by €239 million. In overall official terms, the tax is down €500 million on traget (-12.4%).

Another big tax head is the Excise. This came in exactly at the same level as 2010: €4.678 billion. Excise receipts are down just €25 million on 2009, but significantly lower - by €1.16 billion relative to 2007. Excise taxes are now basically in line with Department projections for Budget 2011. 

Stamps are up, but this is solely due to the pension levy introduction. Leve of Stamps receipts in 2011 reached €1.391 billion, which is €431 million ahead of 2010 and €461 million ahead of 2009. But once we factor out pension levy receipts, Stamps are actually down €26 million on 2010 and just €4 million ahead of 2009 levels. Compared to 2007 Stamps are down a massive €2.25 billion once pension levy is accounted for. And Stamps are down on target as well - by some €21 million.

When it comes to capital taxes, combined CAT and CGT receipts came in at €660 million or 12.9% ahead of 2010 receipts, although still 17.1% down on 2009 levels.

Both tax heads combined were bang-on on target.

So overall, of top 5 tax heads, 3 were behind the target despite the fact that Income tax included reclassification of tax revenues under USC, one was bang on target and one was ahead of target once temporary pensions levy is added, but behind target when this is netted out. In a summary, 4 out of 5 tax heads have underperformed the target and one came in at virtually identical levels to target. Where's, pardon me, the fabled 'improvements' and 'stabilization' in Exchequer revenues that Minister Noonan has been talking about?

Overall tax revenue stood at €34.027 billion in 2011, which is 7.16% ahead of 2010 and 2.97% ahead of 2009. However, if we are to correct for reclassified Health levy receipts and temporary pensions levy receipts, tax revenues for 2011 were at €31.552 billion, or 0.63% below those in 2010. tax rates went up, tax revenues went down, folks. Not what one would term an improvement in performance.

Even using dodgy apples-for-oranges accounting procedures deployed by the Government, tax revenues are down 2.5% on the Budget 2011 target. How on earth can anyone claim this to be 'stabilizing' performance or an 'improvement' defies any logic. 

Let's do the sums: 

• 2011 total tax revenues were €873 million behind Budget 2011 projections. These included non-tax revenue of at least €2 billion (Health levy) that was re-branded as tax revenues this time around, plus €457 million hit on pensions (not in the Budget 2011) and a delayed set of corporate returns of €261 million. So overall, tax revenues are down on target not €873 million, but €1.069 billion. 
• At the same time 2010-2011 outrun surplus claimed by the DofF at €2.522 billion in reality is a revenue gain of just €308 million.

That means that the Exchequer revenues side performance was really surprisingly unimpressive.

05/12/2011: Irish Exchequer Receipts: November 2011

Time to catch up with that data on Exchequer receipts for November - the critical month that makes or breaks Government budgets.

Income tax receipts: these are down to €12,709mln in 11 months of 2011, or -€272mln to target (-2.1%) but an impressive 22.5% above same period 2010 levels.

Sounds like tax policies of the past bearing fruit? Not really. Income tax rose €2,336 on 2010 in absolute terms, but at least €1,850mln of this is due to Health Levy reclassification as USC and aggregation into income tax receipts. Yes, folks, for all income tax increases in years past, the Exchequer netted less than €500mln in new revenues this year, or to be slightly more precise - an uplift not of claimed 22.5% (DofF maths), but of closer to just below 4.7%. The picture below looks good, but in reality, Income tax revenues are running below 2008 and 2009 levels, still, once Health Levy is factored in.

More ominously, the under-€500mln lead this year is based on the annual rate of Health Levy pay-in for 2010 spread evenly over all months. Of course, it probably was also peaking at around November, as usual seasonality in returns applied to it as well as to other income-related measures. Which means that it is quite possible that the annual rate of income tax increases will be even lower, once we see December figures than 4.7% figure suggests.

Let's recall that these figures come on top of shrinking workforce and rising unemployment and you get the picture - people at work are not getting anywhere, with their taxes rising dramatically in recent years, but Government revenue is not recovering either.

When it comes to VAT (second largest source of state revenues), the numbers are abysmal. November 2011 revenue is at €9,550mln or €464mln off target and 3.3% below 2010 figure (-€464mln). VAT receipts are 7.9% below those for the same period of 2009. Chart below shows what happens

Corporation tax receipts - the reflection of our booming exporting economy came in at €3,510mln or €236mln behind target and 4.3% or -€158mln down on 2010. Compared to 2009 these are now off 6.43% or -€241mln. Fourth straight year of decline.

Excise tax, the third largest category, is upo a whooping €15mln on target to €4,130mln, year on year the uplift is €39mln or 0.9%. And there was an even greater uplift in Stamps - up €442mln o  target to €1,297mln and up 51.6% year on year. Except, of course, that uplift is accounted for by the hit-and-run pension levy. Net of the pension levy, Stamps are actually down 1.75% yoy.

So total tax receipts are:

• Down €520mln on target (-1.6%) but officially up 7.9% (+€2,325mln) yoy
• Up just €18mln year on year once we net out Pension & Health Levies.
• Down on target in 3 out of top 4 tax headings and 
• Down on target in 5 out of 8 headings

Meanwhile, rosy forecasts continue to flow from the DofF which projects that 2012 total tax revenue will rise 4.13% (see here)... pass that funny gas mask, doc.

23/11/2011: A longer term view of Ireland's structural deficits

Someone recently requested the analysis of structural deficits for Ireland. So here's a quick note. All data is taken from IMF WEO database for September 2011. IMF estimates 2011 deficit and forecasts deficits for 2012-2016. All frequencies and cumulative data calculations are my own.

Let's start with graphing our structural deficits. Remember, these are measured as % of total potential GDP, omitting the effects of business cycles on volatility in GDP. This makes structural deficits to be less precise than actual deficits, but useful in so far as they tell us the story of the long-term sustainability of the Exchequer spending.

Chart 1 below shows the overall structural deficits expressed as the percentage of potential GDP and in absolute national currency terms.

In the nutshell, the above chart shows that Ireland remained structurally insolvent for the entire history of the series since 1980 through 2010 and is expected to remain insolvent through 2016. It also shows that:

• Ireland was least insolvent in 1997-200 when the average structural annual deficit was just -0.65% of potential GDP
• The closest we came to structural balance was in 1997 when structural deficit hit -0.394% and in 2000 when it was at -0.209%
• Our peaks of insolvency were 1981 (-14.034%) and 2008 (-13.323%)
• Our worst periods of insolvency were the early 1980s, when 1981-1986 average annual deficit stood at -12.125% and 2007-2010 when structural deficits averaged -10.555% annually (omitting 2007 raises this to -11.266%)
• In 2011 we are expected to run structural deficit of 6.761% and in 2012-2015 we are expected to run average structural deficits of -3.753%.

All of these deficits add up to a nifty number. Chart below shows cumulative structural deficits. Per this, by the end of this year, our structural deficits since 1980 on will be adding up to €162.3billion. By 2016 these numbers are forecast to rise to €193.6 billion.

In terms of the frequencies of various solvency performance conditions, Irish structural deficits historically exceeded 3% per annum in 26 out of 32 years, implying a 84% chance of excessive unsustainable structural deficits. In contrast, relatively safe deficits (<2%) occurred in only 4 years in 36 years of history plotted above: 1997-2000. Thus, Ireland was close to sustainability only 13% of the time.

05/10/2011: Tax burden distribution: Q3 2011

Tax profile for September yielded another sign of continued shift in tax burden onto the shoulders of ordinary households, courtesy of:

1. Continued underperformance in corporate tax returns despite booming exports activity
2. Continued graft of household budgets under the USC and levies.

Overall tax burden in Q3 2011 has shifted as follows:

• Q2 2011 share of Income tax receipts in total receipts was 39.52%. Q3 2011 share of Income tax receipts in total receipts was 38.40% against Q3 2010 share of 33.20% and Q3 2007 share of 28.04%
• Q2 2011 share of VAT receipts in total receipts was 33.22%. Q3 2011 share of VAT receipts in total receipts was 33.17% against Q3 2010 share of 36.81% and Q3 2007 share of 37.41%
• Q2 2011 share of Corporation tax receipts in total receipts was 9.32%. Q3 2011 share of Corporation tax receipts in total receipts was 8.52% against Q3 2010 share of 9.86% and Q3 2007 share of 7.39%
• Q2 2011 share of Excise receipts in total receipts was 14.4%. Q3 2011 share of Excise receipts in total receipts was 13.4% against Q3 2010 share of 14.77% and Q3 2007 share of 13.79%
• Stamps, CGT and CAT combined share in Q2 2011 was 2.64% against Q3 2011 share of 5.67% and 4.73% in Q3 2010 and 12.67% in Q3 2007.

Charts to illustrate:

05/10/2011: Tax receipts for September

Tax receipts for September released yesterday show predictable evolution along the trend established in recent months - the trend of broadly matching the targets, but continuing to surprise on the downside in some core categories. In other words, no signs of recovery here, folks.

Here are the details.

Income tax came in at €9,254mln (this, of course, includes USC, rendering annual comparisons virtually meaningless). Compared to the target, Income tax receipts were up €147mln or 1.6%. Year on year Income tax came in at +25.7%, much of which is due to levies and USC, making multi-annual comparisons even less meaningful. Annual target for the category envisions an uplift of 25.3%yoy so we are slightly ahead of that for now.

The bright-ish spot that is Income tax is offset by the continued fall off in VAT. Through September 2011, VAT receipts stood at €7,994mln down on the target of €8,294mln (-3.6% or €300mln shortfall). Year on year VAT receipts are down 2.04% or -€167mln. VAT receipts are now down 7.7% on comparable period of 2009 and mark the worst year-to-date for 2007-present period.

Corporation tax - the Big White Hope of the 'exports-led recovery' is below target at €2,054mln (do notice that Government's Great Hope is less than 1/4 of the income tax as far as contribution to the overall Exchequer balance goes). Target was €2,085mln, so the shortfall now stands at -1.5% or €31mln. Corporation tax performance through September 2011 is now at the worst levels in 2007-present period despite all the record activities in exporting sectors, which again puts the boot into the Government's claims that exports-led recovery will restore our economy to health.

Excise tax is also underperforming the target, coming in at €3,229mln or €77mln (-2.3%) below the target. Excise tax revenues are also below 2010 levels by some 1.4% so far, implying that through September, 2011 is the worst year since 2007 in terms of excise tax collection.

In terms of smaller taxes:

• Stamps came in at surprisingly high levels of €1,124mln in 9 months through September, up €384mln or 51.9% on the target. This builds on gains in July and, most likely, represents incidental returns from one-off activities, such as €457mln expropriation of private pension funds via the FG/LP levy (HT to Jerry Moriarty of http://www.iapf.ie)
• Capital taxes are below target and posting the worst year so far for the entire 2007-present period.

Overall tax returns are now at €24.098bn, up 0.7% or €160mln on the taget and 8.7% on 2010 performance, with virtually all the yoy gains achieved due to USC reclassifying health levy into tax revenue, plus through increases in tax burden on households.

Relative to overall annual target, 0.7% increase on target through September 2011 and 8.7% increase yoy in outrun to-date are contrasted by the annual target set at 9.9% over 2010 outrun, so we do have to step up tax returns performance in months to come dramatically to deliver on the annual target.

More on the tax burden distribution in the subsequent post.

To conclude - tax receipts show no signs of substantive change in the overall Exchequer position on 2010 broadly confirming that 'exports-led recovery' thesis for restoring Irish economy to health, at the present, remains invalid.

11/08/2011: Exchequer balance for July 2011

Staying on the topic of Exchequer performance - the theme is (see earlier post here) "The dead can't dance". This, of course, refers to our flat-lined economy and the ability of the Government to extract revenue out of collapsing household incomes, wealth and dwindling number of solvent domestic companies.

Let us now briefly cover the remaining parts of the Exchequer equation: spending and overall balance position.

Overall, the Exchequer deficit at end-July 2011 was €18.894bn compared to a deficit of €10.189bn in the first seven months of 2010. The increase reflects a number of things.

The Government has issued back in March this year some €3.085bn worth of bank promisory notes to the larks of Irish banking: Anglo, INBS and EBS, all of which have since ceased to exist. On top of that the Government showered some €5.241bn of taxpaers cash onto the elephants of the Irish banking system: AIB (the Grandpa Zombie) and BofI (the Zombie-Light). To top things up, the Exchequer pushed some €2.3 billion of taxpayers funds into IL&P (the msot recent addition to the Zombies Club).

Controlling for banks measures, 2011 deficit through July stands at €8.241bn which represents savings of €1.449bn on same period of 2010. So, now recall - tax receipts went up by €1.48bn in total. Ex-banks deficit shrunk by €1.45bn in total... which, of course, strongly suggests that the "Exchequer stabilisation" so much lauded by our Government was achieved largely not due to some dramatic reforms or austerity, but due to old-fashioned raid on taxpayers' pockets.


Aptly, folks, austerity is not to be found in the aggregate figures. Per DofF own statement, "total net voted expenditure at end-July, at €25.7 billion, was €224 million or 0.9% up year-on-year. Net voted current spending was up €813 million or 3.5% but net voted capital expenditure was €589 million or 26.4% down. Adjusting for the reclassification of health levy receipts to form part of the USC which has the effect of increasing net voted expenditure, it is estimated that total net voted expenditure fell 2.6% year-on-year." Hmm... ok, there seems to be some austerity, but on capital spending side.

The main culprit for this is the continuous rise in Social Protection spending and low single-digit decreases in spending in some other departments. Hence, unadjusted for changed composition:

• Communications, Energy and Natural Resources spending declined just 8.1% on 2008 levels for the period January-July 2011
• Education and skills - by just 8.2%
• Health - by only 4.3%

While Social Protection spending rose 49.7% on 2008 levels and Department of Taoiseach is up 1%.

It is worth noting that lagging in cuts departments account for ca 49.12% of the total spending by the Government, while Social Protection accounts for 30.07%.

We might not want to see the above areas cut severely back, but if we are to tackle the deficit, folks, we simply have to. Why? Because our debt is rising and this debt is fueled largely by the deficit.

And this means that our debt servicing costs are also rising. Total debt servicing expenditure at end-July, including funds used from the Capital Services Redemption Account was just over €3 billion. Per DofF statement, "Excluding the sinking fund payment which had been made by end-July in 2010 but which has not yet been made in 2011, debt servicing costs to end-July 2010 were some €21⁄4 billion. The year-on-year increase in comparative total debt servicing expenditure therefore was €3⁄4 billion." One way or the other, we are paying out some 12% of our total tax receipts in debt interest finance. That is almost double the share of the average household budget that was spent on mortgages interest financing back at the peak of the housing markets craze in December 2006 - (6.667%).

11/08/2011: Irish Exchequer receipts July 2011

August is a silly season, so forgive me for avoiding digging too deep into silly data. This includes the data on Exchequer spending and tax receipts. They are silly. Why? Because the shambolic rearranging of chairs on the deck of the proverbial Titanic - the so-called reforms of the Departments - has made historical references invalid. We no longer are able to check what the Government is really doing and instead are forced to rely on what the DofF is telling us that the Government is doing.

This means two things for this blog. One, I will still be updating the datasets on spending, but will do this over longer time horizon spans than monthly. And I will still be updating tax receipts figures, which are, at least, more consistent than spending figures.

Here are the latest figures for August.

Total tax revenues for January-July 2011 was €18.633 billion which is €1.48 billion or 8.63% higher than in the same period last year. According to the DofF note, "This year-on-year increase was due primarily to higher income tax receipts, arising from the Budget 2011 measures, including the introduction of the USC. Excise duties, corporation tax, customs duties and stamp duties all recorded year-on-year increases also."


Overall, income tax rose to €7,277mln in 7 months of the year on 5,81mln collected in the same period of 2010 - a 25.1% increase. Again, as mentioned above, this includes USC measures. Income tax receipts are now up 14.5% on same period of 2009 and in fact are ahead of the same period of 2007, but again, this is surely due to transfer of USC.
Sadly, enough, they wouldn't tell us just how much of this increase was organic (out of old tax revenues) and how much due to USC. The note on spending attributes €604mln to USC on the side of the expenditure adjustments. So carrying the same over to tax receipts side implies that non-USC related tax measures in Budget 2011 have lifted tax revenue by €876mln so far in the year or annualized rate of tax increases of ca €1.5 billion. This arithmetic suggests that income tax receipts in Jan-Jul 2011 were around €6,673mln or still below 2008 and 2007 levels.

Adjusting total tax receipts for the above estimate of USC puts total receipts at €18,029 - a level 5.1% ahead of 2010 and 3.53% below 2009 figures. Not exactly a spectacular improvement in the 4th year of the crisis and after 3 years of austerity budgets. And not exactly spectacular improvement given that officially, per our Government claims, we are out of the recession now since Q4 2010.

The Government loves targets, even if the objectives they set are unambitious enough to be able to deliver on them. In this department, we are doing ok. Tax revenues were €263 mln (1.4%) above target. Income tax was €160 mln or 2.2% above target at end-July, but, per DofF own admission, "excluding the beneficial impact of earlier than expected DIRT payments, both in April and July, income tax was a little below target in the first seven months. That said, the underlying performance of income tax in recent months has been encouraging, with the targets for both June and July marginally bettered."

Enough said about targets. Back to data.

Vat came in below 2010 levels at January-July 2011 receipts of €6,399mln against 2010 period receipts of €6,478. The shortfall now stands at 8.07% on 2009 and 1.22% yoy. So as the chart below shows, Vat is trending along the worst year on history - 2010.

Corporate tax revenues were €1,648mln which is a vast improvement of a whooping €23mln (what the Dail spends on expenses, roughly) yoy (+1.42%). Corporation tax is now down 12.57% on same period 2009 which was the best year for this line of tax receipts in 2007-present period.

Excise duties recorded a €101mln (4.05%) surplus in the first seven months of the year relative to 2010, which translates into 0.54% increase on the same period of 2009.

The rest of the tax heads were all over the shop. Stamps improved by 23.9% yoy, but remain marginal and the improvement was due to timing factors. CGT and CAT are both down (and both are extremely marginal in size), suggesting that capital investment in the economy remains on downward trajectory. Customs were up 9.9% yoy - potentially due to increased improting activity in May-June 2011 as MNCs beefed up their stocks of inputs.

So overall picture on tax receipts side suggests:

1. Extremely poor performance on Vat and capital taxes - implying no domestic consumption or investment pickups;
2. Lackluster performance on income tax (ex-USC), with receipts stable around 2008-2009 levels
3. Mediocre performance on corpo tax, despite strong production activity in the MNCs-dominated exporting sectors
4. Transactions taxes running within 2009-2010 performance readings.

Things are, therefore, stable - in a 'the dead can't dance' way.

05/07/2011: Irish Exchequer Expenditure: H1 2011

Previous posts on the H1 2011 Exchequer results covered Exchequer balance, Tax Burden composition, and Exchequer Receipts. This post will cover Exchequer Expenditure side of the balance sheet.

Please note: cross annual comparisons are distorted by the changes in departments compositions and remits. Nothing we can do about this.

Top level numbers for H1 2011.

Agriculture, Fisheries and Food (accounting for 1.8% of the total Net Voted Expenditure - NVE) spending stood at €388 million in H1 2011, down 28.9% on the same period for 2008 and down €79 million or 16% yoy, though all of the savings came from the capital side, with current spending up €87 million yoy (+44%).

Art, Heritage & Gaeltacht (0.5% of total NVE) managed to spend €108 million in H1 2011, down 67.3% on 2008. Spending here is down 68% yoy (saving €158 million) with most of savings coming from the current side, although in proportional terms capital savings are on par with current savings.

Communications, Energy & Natural Resources (0.4% of NVE) spending in H1 2011 was €98 million, up €13 million (+15%) on 2010. Increases in spending took place on current side (+€11 million or 28%) and capital side (+€2 million or 4%). Relative to H1 2008 spending is down 14.9% which is 7th lowest rate of savings amongst the departments.

Community, Equality and Gaeltacht Affairs (0.5 of NVE) - no, don't ask me why is Gaeltacht having itself spread over 2 departments - spent €105 million, down €79 million (-43%) yoy. This time around, most of the savings in volume came from the current spending side, but in relative terms, capital spending is down 77% while current spending is down 36% yoy. Department spending has fallen 53.9% on comparable period in 2008.

Defence (1.9% of NVE) spent €419 million, which is down 13% on comparable period in 2008, making the department 6th lowest saver in the entire voted expenditure set. Department spending was up €4 million yoy with all of the increase accounted for by current spending.

Education and Skills spent €4,066 million in H1 2011 which is €171 million above H1 2010. Capital side increased by €59 million (+58% yoy) and current side was up €113 million (+3%) yoy. The department is the third largest of all Government Departments, accounting for 18.6% of NVE. Overall austerity has resulted in a 4.8% decrease in Department spending through H1 2011 compared to H1 2008, making the level of savings achieved the fourth lowest of all departments.


Jobs, Enterprise, Trade & Innovation (1.5% NVE) spent €336 million in H1 2011, down 48% on H1 2008. Compared to H1 2010, department spending fell €219 million (39% drop yoy) with current spending falling €245 million (-62%), while capital spending rose €26 million (+16%). Much of the capital side increases across the departments is attributable to the timing of spending with previous Government actively delaying paying on capital projects until later in the year. At least, with the current Government, contractors might be getting paid more on-time for their work.

Environment, Community & Local Government (2.6% of NVE) spent €561 million in H1 2011, down 52.8% on H1 2008. Spending was down €200 million yoy (-26%) with capital savings of €119 million (-32%) and current savings of €81 million (-21%).

Finance (2.3% NVE) managed to spend €510 million in H1 2011, down 20.3% on 2008 and achieving savings of a miserly €4 million yoy, with €20 million saved on current spending side and a deficit on 2010 of €16 million on capital side.

Foreign Affairs and Trade (1.6% of NVE) spending of €342 million is down €61 million (-15%) yoy, with €59 million of the savings coming from the current side. Relative to H1 2008, current year performance is delivering savings of 29.7%.

Health (the largest of all departments, with 30.9% of NVE, although Social Protection is coming close second and is bound to overtake Health by year end) spent €6,757 million in H1 2011, up a massive €666 million yoy of which €662 million came from the current spending side. With all of this, Health spending is now down 0.8% on H1 2008. The figures are obviously distorted by the introduction of USC, but as of H1 2011, the department has achieved 3rd lowest rate of savings of all departments.

Another billionaire department: Justice & Equality (4.9% of NVE) had total spending of €1,081 million in H1 2011, up €32 million on H1 2010 (+3%), with deficit coming at €56 million on current side, offset by savings of €24 million on capital side. Department spending is down 12.2% on H1 2008 - 5th lowest rate of savings across all Departments.

Social Protection (soon to be the largest spending department in Ireland but in H1 2011 accounting for 29.8% of NVE) spent €6,517 million - up 10% or €589 million yoy, with €587 million of this increase coming from the current side. Compared to H1 2008, H1 2011 spending rose 49.5% making it the worst performing department when it comes to savings.

Taoiseach (0.5% NVE) came with a bill of €108 million in H1 2011, which was 23.1% above comparable period in 2008. More than that, the department managed to increase its spending on 2010 as well, with cost rising by €20 million (+29%) yoy all of which came from current spending increases.

Transport, Tourism & Sport spending of €593 million in H1 2011 was 187 million down on H1 2010 (-24%) with savings of €240 million achieved on capital side and current side yielding an overrun of €53 million on 2010. The department accounts for 2.9% of NVE and spending here is down 53.8% on H1 2008.

So the top of the line numbers are: in H1 2011 Total Net Cumulative Voted Spending stood at €21,898 million or which €20,547 million were accounted for by current spending and €1,351 million by capital spending. Overall expenditure is now €399 million above H1 2010 (no sign of austerity here, if anything, spending just rolls on at the aggregate) - an overspend of 1.9%. On Current expenditure side things are even more 'boomish' with overspend relative to 2010 at €892 million (+4.5%). Capital took another hit of real austerity with spending here coming €493 million below H1 2010 (-26.8%).
The above clearly shows that while austerity has caused some real pain in specific departments, it has not been successful in reducing total spending. This is even more worrisome, when one recognizes that by now, capital account has been drained with no sizable potential future savings to be achieved on this side. On the current expenditure side, austerity so far has meant taking spending on one side of the Exchequer shopping list and spending it on the other. One way or the other, this is not austerity, folks. It's reallocation of expenditure priorities.

Now, recall, in H1 2011 we spent total of €21,898 million. That is just €804.5 million in savings relative to H1 2008 (or 3.54% improvement) - after 3 austerity budgets!

So what do these figures look like in dynamic setting - month-to-month?
And where do we take money from and reallocate to?
No need for another comment here.

04/07/2011: Exchequer balance: H1 2011

Exchequer results are in for June and in the previous two posts I discussed tax receipts (here) and overall distribution of taxation burden across various tax heads (here). In this post, I will be quickly covering Exchequer balance/deficit for H1 2011.

Overall tax and non-tax revenues came in at €16,744.6 million against €15,298 million in H1 2010 with both tax revenues and non-tax receipts on current side coming upside. However, total voted current account expenditure came in at €20,547 million in H1 2011, up on €19,655 million. This hardly amounts to 'austerity' working (more on expenditure analysis in the later blogpost).

Non-voted current expenditure came in at €3,375 billion, similar expenditures for 2010 over the same period were €3,071 million. Banking measures in H1 2011 accounted for €3,085 million against comparable period 2010 official (see below) figure of zero.

Overall, Exchequer deficit for H1 2011 stood at €10,828.5 million against 2010 figure of €8,887 million. Excluding banking measures H1 2011 deficit stood at €7,743, while excluding banking measures accumulated over 2010 and backed-out to June 2010, the ex-banks deficit for H1 2010 was around €7,590. Note - this imperfectly takes into account variable timing for deficit increases due to banks measures.

Here's the chart:
Again, I am not seeing any dramatic improvements here on 2010 performance.

It is worth noting - remember that department expenditure will be covered in the later post - that national debt interest and management expenses through H1 2011 have risen to €2,501 million from €2,231 million in H1 2010. Thus interest and debt management cost are currently running at 16.36% of total tax receipts.

Through H1 2011 we have borrowed €11,370 million from EFS, €7,178.5 million from IMF and €3,659.6 from EFSF, so total borrowings rose from €7,589.6 million in H1 2010 to €16,653 million in H1 2011. Of the money we borrowed (at more than 5.8% pa), €10,277.5 million is still held in deposits with Irish banks at, oh, maximum rate of ca 1.4-1.5% (see here) implying an annualized cost of this shambolic support for Irish banks to the Exchequer of ca €450 million - oh, about the amount of money the Government is clawing out of the pensions levy?..

04/07/2011: Tax burden composition: H1 2011

A quick post summarizing changes in the overall tax burden in Ireland, based on the latest Exchequer returns.

In Q2 2011:

• Income tax took up 39.52% of the total receipts, up from 28.7 in Q2 2007 and 34.42% in Q2 2010
• Share of VAT in total tax receipts has declined to 33.22% from 35.49% in Q2 2010 and from 34.97% in Q2 2007
• Share of Corporation tax receipts also dropped to 9.32% in Q2 2011, down from 11.16% in Q2 2010, but up from 7.48% in Q2 2007
• Excise taxes accounted for 14.4% of total tax intake in Q2 2011, down slightly from 14.4% in Q2 2010, but up on 13.91% in Q2 2007
• Stamps, CGT and CAT have fallen from 14.06% share in Q2 2007 to 3.63% in Q2 2010 and to 2.64% in Q2 2011.

04/07/2011: Exchequer Receipts: H1 2011

Exchequer receipts are out for June and here are the stats on tax receipts (expenditure and deficit analysis forthcoming later).

Headline figures:

• Income tax came in at €6,038 cumulative for January through June 2011, which obviously includes the new USC. There is no point of comparing this against previous years, so I will include a chart only for completeness. So instead - relative to target: income tax came in above the target by €11 million cumulative for 6 months through June, or +0.2% - not exactly a stellar performance by any possible measures.
• But here's an interesting bit (illustrated in the chart) inclusive of USC, 2011 income tax for the first 6 months of the year is pretty much matching 2007 income tax for the same period (€5,972 million) which had no USC receipts in it.
  

• VAT surprised on the downside, with receipts at €5,075 million or 8.89% below same period in 2009 and 0.92% below same period in 2010. 2010 first six months yielded receipts of €5,122 million. VAT receipts are now running 2.6% below target or some €134 million short.
  

• Corporation tax receipts continued their fall off the cliff, albeit the distance to the bottom seemed to have shrunk somewhat. January-June 2011 corporate taxes came in at €1,424 million, some 11.55% below 2010 figure of €1,610 and some 24.26% below the same period of 2009. Corporate tax receipts are now €116 million (or 7.6%) behind target.

• Excise taxes came in at €2,200 million, up 5.5% yoy and up 2.76% on 2009 period. This means that Excises are now €79 million (3.7%) ahead of target.

Of smaller tax heads:

• Stamps are down 5.02% yoy and down 22.97% on 2009. Put things into perspective, in 6 months through June 2007 stamps yielded €1,696.5 million for the Exchequer. In the same period this year - only €265 million, down 84.38%.

• Capital taxes: CGT fell to a miserly €90 million down from €114 million in 2010 and from €1,046.1 million in the same period in 2007. That's contraction of 91.4% on 2007 figures.
  
• CAT fell off the cliff (despite QNA showing uplift in fixed capital formation in Q1 2011, suggesting that the uplift had little to do with indigenous investment - taxable - and more to do with MNCs - non-taxable), shrinking to €48 million in H1 2011 down from €131 million in the same period of 2010.

• Lastly, Customs came in at €117 million, up 16.3% from €101 million a year ago.

Total tax receipts have therefore increased (again, due to USC) to €15,279 million in H1 2011 from €14,432 million in the same period 2010 (+5.87%), but are down 3.35% on same period of 2009 and are 26.59% below their level in 2007.

Relative to target, Irish Exchequer receipts for H1 2011 are €115 million (0.7%) short of budgetary targets. So no smoking gun there so far, but the risks remain on the downside as economy signals slowdown since May.