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: Banking Guarantee & Cross-Border Deposits Protection Co-operation

My comment for the Central Banking on the Irish example of importance of cross-borders cooperation in deposit insurance. Apologies for pdf copies, as the site is subscription only.

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.

04/07/2011: New Deposits in Irish Banking

Over two previous posts I examined the data for new business loans rates for households (here) and non-financial corporations (here and spreads here). This post covers the deposits – both household and corporate.

Here is what the data on new deposits telling us:

• Rates for household deposits with agreed maturity have fallen significantly between March 2011 (1.93%) and April 2011 (1.81%). The rates are now below those for the historical average of 2.366% and crisis period average (January 2008-present) of 2.394%. 12mo MA is 1.707%. The volatility of the rates has risen during the crisis from standard deviation for historical period being 0.950 to crisis period standard deviation of 1.155.
• At the same time, new deposits volumes have contracted sharply for households from €12,333 million in March 2011 to €7,873 million in April 2011. Historical monthly average is €12,636 million and crisis period average is €12,938 million with 12mo MA at €10,079 million. April level of new deposits is the lowest since January 2003 – the start of the series.
• Rates for non-financial corporations’ deposits with agreed maturity have risen from 1.41% in February and March to 1.52% in April, standing still below the historical average of 2.336% and crisis period average of 2.125%, but well ahead of the 12mo MA of 1.293%. The volatility of these rates has risen sharply during the crisis to a standard deviation of 1.319 from historical standard deviation of 1.036.
• Volumes of corporate deposits with agreed maturity have declined from €6,720 million in March 2011 to €5,170 million in April 2011. These levels compare extremely poorly against historical average of €13,739 million, the crisis period average of €11,593 million and 12mo MA of €7,277 million.
  

Lastly, consider the spreads between deposit rates available to the households and those available to corporate clients. Keep in mind that from funding perspective, households deposits are probably less volatile than corporate deposits. Note that standard deviations for the two types of deposits by volume were: historical 3,000.8 million for households against 4,198.09 million for corporates and this relationship remains relatively stable for the period of the crisis.

So the spread on deposit rates for households over and above corporate deposit rates has narrowed to 0.29 percentage points in April from 0.52 pp in March 2011. Historical average spread was 0.03 pp and crisis period average is 0.269 pp while 12mo MA spread is 0.413 pp.

04/07/2011: Irish property prices - daft.ie report

My comment and rather back-of-the-envelope outlook for Irish property markets is available with daft.ie report - link here. Note that the prediction concerning rents-prices feedback is based on my earlier analysis published here - see the last chart.

Strangely, at least in one instance my opening paragraphs were identified by some commentators as being a 'political statement'. To all who know my work, this should sound like a mistake for two reasons:

1. I have never taken partisan political positions. While I do hold strong policy views, these are not aligned with any political party or movement. I have consistently provided advice to and public engagement with any political party or movement that asked for such. During the last election, as in the previous elections, I did not support any particular party, although I did support / help a number of individual candidates whose views span left and right of the political spectrum and with whose views I was not necessarily in full agreement.
   
2. The entire opinion piece is based on my understanding of economic facts. I have spoken on many occasions about the adverse effects of increased taxation on investment and household spending. I have been vocal about the mirage of 'foreign investors flocking to Ireland' stories being pulled out of thin air by our real estate journalists. Over a number of years, I have been critical of the state policy of promoting - via pricing systems and lack of regulatory independence - inflation in state-controlled services. Nothing political here.