Irish deficit on target at end of third-quarter, spending a worry

DUBLIN Tue Oct 2, 2012 1:54pm EDT

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DUBLIN (Reuters) - Ireland kept ahead of its revenue goal for the year at the end of the third quarter but government overspending persisted, keeping the pressure on Dublin with more austerity to come.

Ireland expects to better the target set under an EU/IMF bailout to reduce its budget deficit to 8.3 percent of GDP this year from 9 percent in 2011. Finance Minister Michael Noonan said on Tuesday he was confident revenue goals for the year would be met.

That was after tax returns came in 1.5 percent ahead of target at the end of September, a month when a tenth of total tax is collected, giving Ireland a buffer in its bid to raise more revenue this year, but one less comfortable than when it was 3.1 percent ahead of expectations in June.

"The exchequer returns highlight the progress the government is making in restoring the public finances to a more sustainable position," Noonan said in a statement.

"Although challenging targets still remain for the last quarter, I am confident that the overall tax revenue target for 2012 tax receipts can be achieved."

Three of Ireland's so-called 'big four' tax heads - income, corporate and sales tax - remained technically ahead of target, although when 261 million euros ($337.60 million) of corporate tax receipts that were due last December but received in January are excluded, corporate tax was 0.5 percent behind profile.

The better-than-expected tax take was offset again by continued government overspend with department expenditure coming in 2 percent above target versus 1.6 percent in August, chiefly due to the swollen health and social-protection budgets.

The health department has come under particular criticism from Ireland's bailout lenders and has scrambled to find additional savings in recent weeks through cutting back on care for the elderly and overtime pay and telling senior doctors to work more flexible hours.

When stripping out a reclassification of an employment levy from spending to taxation, the picture was not so bad for social protection, the department charged with dole payments which have ballooned as Ireland's jobless rate nears 15 percent.

The country's deficit for the first nine months of the year fell to 11.1 billion euros from 20.6 billion a year ago, mainly due to the state recapitalizations of lenders last year and the rescheduling of other bank-related payments earlier this year.

The figures also showed that non-tax revenues, which are equivalent to almost one-tenth of the tax take, were 20 percent higher year-on-year, with a third of that coming through fees from a state guarantee on bank deposits that the government is looking to wean lenders off over time.

While analysts said Ireland remained on target to meet its deficit targets for the year, they warned the government that it will need to deliver on expenditures savings next year and not rely on another 12 months of over-performance on the tax side.

"With the positive year-to-date surprise on the reported tax revenue side largely offset by the negative year-to-date overshoot on the headline voted expenditure side, Ireland's public finances remain poised to meet their full-year targets,"

"However, any indiscipline on the spending front will need to be addressed by the government if it is to meet its target for the 2.25 billion euro expenditure component of the planned 3.5 billion in fiscal consolidation measures planned for Budget 2013."

(Reporting by Padraic Halpin; Editing by Michael Roddy)

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