The budget day forecast for the 2002 Exchequer balance is for a surplus of €170 million. This is still the target although it may be achieved by a lower revenue performance than forecast offset by savings and other receipts not available at budget time, including lower than expected EU budget contribution and the proceeds of the sale of ACC Bank. The end-May Exchequer returns showed a surplus of €56 million.
Budget forecasts for the public finances are predicated on the level of activity in the economy and relate to the full year, not a portion of the year. On budget day, an increase of 3.9% in gross domestic product in 2002 was forecast for the year.
The increase in tax receipts in 2002 over 2001 was forecast at budget time to be 8.6%. The end-May Exchequer returns showed tax receipts in the first five months were 1% lower than the same period in 2001 – an improvement from the end-April position of 1.8% below the same period in 2001.
These results must be considered in the context of the budget day changes which will boost revenue later in the year. The 2002 budget change to corporation tax payment dates will enhance receipts from June onwards. The increase in the standard rate of VAT from 20% to 21% in March of this year began to be received in May.
While income tax receipts to end-May show a decrease of 14.7% on the same period last year, it should be noted that the impact of the change to a calendar year means that the first five months of 2002 have had to absorb the income tax changes from both budget 2001 and budget 2002. In addition, payments into SSIA accounts in the period January to May 2002 totalled €125 million whereas there was no payment for SSIA in the period January-May 2001. It is expected that income tax receipts will recover ground over the remainder of the year.