Thursday, 2 July 2009

Exchequer returns: misplaced confidence

An tSaoi: Last month’s exchequer figures sent the Taoiseach into his garden to tend the green shoots of recovery. This month the Minister for Finance sees hope as the rate of decline in tax revenue decreases. All this confidence, surely it can’t be misplaced?

Well lad, I am afraid it is. A cursory examination of the figures, confirms that the trend is still awful. The June Summary Sheet is as bad as that for May , with the one exception – Corporation Tax.

The Minister played around with the date preliminary tax is payable, and moved forward the due date for half the tax. At least additional €700M was paid in June instead of next November. Take this out and we are still heading for the abyss.

However some taxes are actually getting worse. Last April when he issued his projections for 2009, he estimated that there would be €958M in tax and income levies paid in June. The figure paid was just €800M. That is a discrepancy of 16.5% just two months after the estimate was made.

Looking at the figures, I see no reason to change my estimate made here last month of a final tax figure between €31,500M & €32,000M.

1 comment:

Fungus FitzJuggler III said...

Good post and well writ!
Desperate times yet no one else to my eyes has tried to show just how bad the finances are.

A rising tide lifts all boats.....yeah!

Deflation is the long term trend now but the structural changes have yet to be publicly recognized, except by your prediction. The unreality of the Irish response is not as bad as that of Iceland.

The idea that Ireland can borrow for the purpose of rescuing bond holders and shareholders from bad banking and government decisions, becomes more ludicrous as the days pass. When they come back from their hols, there had better be a different tone about NaMa, or it will begin to cause loss of confidence in itself. Borrowing costs can and will rise for Ireland.

Taxation increases and other deflationary measures are inevitable until we have stripped out the over investment in some sectors of the economy. We should not expect any growth except in liquidation services.
Tougher times ahead!