Vol. 553 No. 5
69 Mr. R. Bruton asked the Minister for Finance if income tax receipts in 2001 fell short of his budget estimate; if income tax receipts to date in 2002 are falling short of forecast; and the reason for the deviation. [14617/02]
Income tax receipts in 2001 were €9.347 billion compared with a 2001 budget target of €9.879 billion, a shortfall of €532 million. Like all taxes, income tax is affected by the level of activity in the economy. The 2001 budget target for taxes was predicated on a forecast for economic growth of 8.8% in 2001. Preliminary results from the Central Statistics Office suggest that GDP grew by just 5.9% in 2001. Allied to the lower than expected growth in 2001, employment growth was lower at 49,000 rather than the 60,000 estimated at budget time.
A number of other factors also had a negative impact on income tax receipts in 2001. The Finance Act, 2001, introduced income tax measures additional to those proposed on budget day. These measures included the special savings investment account scheme and cost approximately €135 million in 2001, of which €71 million was accounted for by the SSIA scheme. In addition, the income tax package included in the budget for 2001 had of necessity to be costed on the basis of the latest information then available, which was from December 2000. Subsequent revisions to that information added €160 million to the cost of the tax package in 2001.
Income tax in 2002 to date is down 14.7% on last year, compared with a budget target of an increase of 1.1% for the whole year. It is relevant to note that in making this comparison we are comparing five months last year when the economy was growing strongly with five months this year when the economy has been relatively weak. Income tax receipts increased by 9.3% during the first five months of 2001 whereas they fell by 2.1% in the remaining seven months of that year. The change to a calendar year basis means that the first five months of 2002 have had to absorb the income tax changes from the budgets for 2001 and 2002. Payments into SSIAs are made from income tax. No payment was paid for SSIAs in the period January to May 2001 as the first payment was made in June 2001. In contrast, €125 million has been paid out for the same period this year.
From June 2002 onwards most of the distortions caused by the changes to the income tax year will be washed out of the system. On this basis and in line with the pattern in the general economy, income tax receipts should recover over the remainder of the year.
Did the Minister not know when drawing up the estimate of income tax receipts for 2002 that there was a strong first half in 2001 which should have been built into the estimate? Does he agree that average income this year rose by 8% and average employment by 1% which means he should expect an increase in taxation? Clearly, something has gone wrong with the Department's capacity to forecast income tax receipts and the Minister appears to be covering it up.
Will the Minister publish his revised budget outturn for the year in order that we can see the basis on which he is planning? Does he agree that, if as he suggests income tax receipts will be on target this year, they will have to grow in the second half of the year by 20%, 20 times the level of growth he projected for the year?
The Deputy's question is in two halves. One relates to the 2001 shortfall and the other to 2002. I have pointed out that there are distorting factors in the first five months of the year compared with 2001. Tax receipts under some headings are ahead of target for this year, although it is true to say income tax receipts are below what was expected at this stage. Tax receipts will increase in some areas and decrease in others. Certain factors led to the extraordinary receipts for the early part of 2001, but the rest of the year showed a decline.
Expected growth in GDP for this year, which I announced in the previous budget as being of the order of 3.9%, is built into the estimate for tax receipts. The expected growth is predicated upon the first half of the year showing slow economic growth leading to a bounce in the second half, given the usual caveat of the world economy picking up. It is correct to point out that income tax receipts are likely to be lower than the amounts budgeted for, but receipts under headings other than income tax, such as VAT, will be higher than expected.
May I raise a point of order?
Yes.
I wish to bring to your attention that the House is not quorate, there being fewer than 20 Members present.
It is a long-standing tradition in the House that a quorum is not called during Question Time because it is the opportunity for Opposition Deputies to ask questions of the Minister and elicit information. If the Deputy wishes to persist in calling a quorum, the Chair has no choice but to oblige.
Unfortunately and with some regret I do so because a number of small parties do not receive due recognition under Standing Orders. On that basis and in recognition of that fact, I regretfully ask that a quorum be called.
May I raise a point of order?
Yes.
May I have an assurance that, if a quorum is called, the Opposition will not suffer in its ability to ask the Minister priority questions?
Priority questions will run as normal.
Will there be extra time for other questions?
There is a difficulty in that the Government may not feel obliged to provide a quorum and, since the calling of one in this instance is so unusual, we are not in a position to ensure our Deputies are ready to answer the quorum bell. It is an attack on the ability of the Opposition to keep the Government accountable.
The Chair has no option but to call a quorum.
Notice taken that 20 Members were not present; House counted,
The time allowed has now elapsed and as a quorum is not present I suspend the sitting for five minutes.
We resume on Priority Question No. 69 with a final supplementary from Deputy Richard Bruton.
Will the Minister state categorically if he believes his budget of spending and taxation will come in on target this year?
My projected Exchequer surplus figure is €171 million. As is usual in most years, there will be some differences in both spending and revenue. However, at this stage I still expect that there will be an Exchequer surplus of the order of that set out in the budget.
Did the Minister not provide a different figure to the EU under his obligations laid down in the Maastricht Treaty in March of this year?
No. The figure required by the EU refers to the general Government balance. The expected general Government balance at budget time has been revised downwards because, as explained at that stage and in subsequent replies to parliamentary questions, questions were raised about some of the items we were carrying with regard to income vis-à-vis the general Government balance. I refer here, for example, to the treatment of transfers from the Central Bank. The position has been clarified by EUROSTAT in recent weeks and that means there has been a downward revision in the GGB balance, as expected at budget time. However, there will still be a surplus.
