September 4, 2012 / 5:23 PM / 6 years ago

Irish deficit-cutting drive on target as tax take increases

DUBLIN (Reuters) - Ireland said its deficit-cutting drive was on course after better income and sales tax returns put revenues ahead of target in the year to end-August even though the health department pushed spending higher than planned.

Tax returns were 1.7 percent, or 365 million euros ($459.28 million), ahead of target in the first eight months of the year, with income, value-added and corporation tax receipts all better than expected, the finance ministry said in a statement on Tuesday.

“We’re continuing to see tax receipts significantly ahead of both last year and the targets set for this year, which is very positive,” said Peter Vale, tax partner in Grant Thornton.

“What’s interesting is that the tax take has been resilient in the face of a sluggish domestic economy and challenging conditions in our main trading partners,” he said.

This keeps Ireland on target to meet its 2012 deficit target under its EU/IMF bailout program. The country is wading through an unprecedented eight-year austerity drive of tax hikes and spending cuts to reduce a budget deficit that, at 9.4 percent of gross domestic product, was the worst in the European Union last year.

Fellow bailout recipient Portugal, in contrast, is having trouble raising tax revenues as tough austerity measures and a deepening recession are undermining its efforts to meet strict fiscal goals.

As expected, Irish spending was still higher than anticipated after the health department unveiled emergency cuts last week, saying it will cut back on care for the elderly and overtime pay to find 130 million euros of new savings.

Net voted current expenditure was 1.6 percent, or 437 million euros, above target in the year to August at 28 billion euros, but down from a 2.3 percent overspend in the six months to June.

Ireland’s budget deficit for the year to end-August nearly halved to 11.3 billion euros ($14.22 billion) from 20.4 billion a year ago, largely due to one-off factors.

A deal struck in March to reschedule a 3.1 billion euro annual cash payment of high-interest IOUs that Dublin issued to prop up two state-run banks helped reduce the deficit.

Reporting by Lorraine Turner; Editing by Ron Askew and Susan Fenton

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