February Exchequer Returns

The Department of Finance has released the Exchequer Returns for February 2010.  As with the previous month’s figures they do not make for cheery reading.  The documents available are:

• Exchequer Statement
• Analysis of Tax Receipts
• Analysis of Net Voted Expenditure
• Information Note from the Department

The headline tax figure indicates that the rate of decline in tax revenue shows no sign of improving.  January 2010 tax revenues were 17.7% down on the January 2009 return.  For February 2010 we see that the difference on the equivalent month last year was 17.9%.  The decline is actually worse!
If we look at the returns across the main tax headings for the period January-February we see that the returns for all taxes are down on their 2009 equivalents.  The big tax heads of Income Tax and VAT are both down by more than 10%. Click table to enlarge.
In this table you can compare the actual outturn to the Department’s forecasts made at the start of February.  They appear quite good as they are only out by €64 million or 1.3%.  Note though that the forecast of €4.8 billion was made after €3.074 billion was known to have been collected in January.  Thus the €64 million error was made on the February forecast of €1.726 billion, giving an actual forecast error of -3.7%, nearly three times greater.
However, it is the forecasts for the rest of the year that seem even more erratic.  The Department is forecasting that tax revenue for the year will come in at €31.050 billion, about €2 billion or some 6% down on the outturn for 2009 of €33.043.
As we have seen the first two months of 2010 are already down more than €1 billion or nearly 18% on the same period last year, but this is largely in line with the Department ‘forecasts’.  They obviously see an improvement in the remaining ten months of the year as more than half of their forecast fall in tax revenues has occurred in the first two months!
In the period Mar-Dec 2009 some €27.284 billion was collected in taxes.  For the same period in 2010 the Department predict that €26.314 billion will be collected – a drop of just 3.6%. Let me emphasis (again!) that the drop in the first two months of the year was 17.8%.  This has to slow to 3.6% for the rest of the year in order for the €31.050 billion forecast to materialise.  I think this forecast is optimistic.  Here is how the Department thinks we will get there.

Notwithstanding the increase in tax revenue they predict for March, the stand-out figure is the year-on-year jump of nearly 35% in September.  I do not know what factor leads them to believe that September 2010 tax revenue will be more than €800 million ahead of the September 2009 outturn.  Should this figure be 2,148 instead of 3,148?  That would bring the overall figure very very close to €30 billion!
However, the figures for July and August seem overly pessimistic and it is the overall annual figure that matters. It doesn’t matter when the tax is collected, but at this stage it is hard to see €26.3 billion being collected for the rest of the year and even the €25.3 billion needed to bring tax revenue over €30 billion appears unlikely. Tweet