End-August Fiscal Data

Chazz Michael Michaels

The underlying deficit (i.e. excluding banking support measures) in 2011 is now estimated at 9.0% of GDP below the 10.6% of GDP limit set under the EU/IMF Programme.

Tax revenues to end-August, at just under €22.1 billion are €365 million (1.7%) ahead of target. At end-August three of the “big four” sources of tax revenue are ahead of profile.

http://www.finance.gov.ie/documents/exchequerstatements/2012/infonoteaug2012.pdf


Do meeting these targets make any difference, do you think? Or will potenital events in the EZ make it all for nothing?

Count Dooku

Monthly performance much worse due reduced take in income tax (-5.3%), VAT (-2.2%), corporation tax(-3.5%), excise(-19.0%) wit total 7.1% shortfall
Tax increases are not working, very soon it will be good illustration to Laffer curve
http://www.finance.gov.ie/documents/exchequerstatements/2012/analtaxaug2012.pdf

Chazz Michael Michaels

Some good breakdown here:

http://trueeconomics.blogspot.fr/

Laminations

Count Dooku wrote: »

Monthly performance much worse due reduced take in income tax (-5.3%), VAT (-2.2%), corporation tax(-3.5%), excise(-19.0%) wit total 7.1% shortfall
Tax increases are not working, very soon it will be good illustration to Laffer curve
http://www.finance.gov.ie/documents/exchequerstatements/2012/analtaxaug2012.pdf

That just shows August wasn't particularly good but the year to date is running an excess of 1.7% or 7.1% compared to this time last year.

Some good breakdown here:

http://trueeconomics.blogspot.fr/

Hmmm....but according to that it is worse? -scratches head-

Dannyboy83

Count Dooku wrote: »

Monthly performance much worse due reduced take in income tax (-5.3%), VAT (-2.2%), corporation tax(-3.5%), excise(-19.0%) wit total 7.1% shortfall
Tax increases are not working, very soon it will be good illustration to Laffer curve
http://www.finance.gov.ie/documents/exchequerstatements/2012/analtaxaug2012.pdf

That excise figure in particular should be signalling a warning to the government.

Ireland has the most expensive cigarettes in Europe: Ireland is the cigarette smuggling Capital of Europe.

1 in every 4 cigarettes sold in Ireland are sourced from the black market.The State is losing €526 million a year through illegal tobacco, which is smuggled into Ireland and sold without any government taxes or duties.

Fuel smuggling is moving closer to at crisis point
Based on estimates that one in every eight litres of diesel sold in Ireland is illegal, Fuel laundering costs an estimated €155 million in tax losses – .

later12

Dannyboy83 wrote: »

The State is losing €526 million a year through illegal tobacco

can you explain why you're using the Irish Tobacco Manufacturers' Advisory Committee's figure instead of the Revenue's figure? The latter, whilst still significant, being less than half that.

That also assumes that 100% of cigarettes imported illegally would otherwise have come in and been traded legally. I don't think we can really claim that, given the high cost of approved cigarettes.

antoobrien

Laminations wrote: »

That just shows August wasn't particularly good but the year to date is running an excess of 1.7% or 7.1% compared to this time last year.



Hmmm....but according to that it is worse? -scratches head-

He's looking at the capital figures and there is at least one flaw in his reasoning - the corporation tax that has down as part of the August 2011 receipts was not supposed to be booked until December 2011.

As mentioned earlier, €233 million on 2011 revenue side came from the one-off sale of the Bank of Ireland shares, while €251 million of corporate tax receipts booked into 2012 is really the revenue from 2011. This means the deficit in 2011 should be adjusted by -€18 million and the balance in 2012 should be adjusted by +€251 million.

He's using a CT entry that isn't supposed to happen until December to rebalance his figures in favour of 2011. He's ignoring also repayments from NAMA (49m) and the Social Insurance fund (110m).

He'd be better off asking why current expenditure is €3bn higher year vs the same time last year.

Count Dooku

Laminations wrote: »

That just shows August wasn't particularly good but the year to date is running an excess of 1.7% or 7.1% compared to this time last year.

Mostly due accounting exercises with PRSI, which is now included into tax take

Dannyboy83

later12 wrote: »

can you explain why you're using the Irish Tobacco Manufacturers' Advisory Committee's figure instead of the Revenue's figure? The latter, whilst still significant, being less than half that.

Because revenue are working on out-of-date figures and are working off a lower estimate for smuggling I]page iv[/I(1 in 5 cigarettes, rather than 1 in 4 or greater)

http://www.revenue.ie/en/about/publications/tobacco-market.pdf

This research suggests that higher cigarette taxes in Ireland will no longer produce a winwin situation of public health benefits (lower rates of smoking) and benefits to the public
finances (higher levels of tax revenue). More likely, it appears that in the Irish market for
cigarettes as it current stands, a tax increase will reduce revenue but only have a lesser
impact on tobacco consumption by encouraging further substitution away from taxed
cigarettes.
Given the importance of the public health benefits, it is only right that policy-makers
should aim to reduce smoking and tobacco taxation has been a key tool in addressing
this objective. However, policy-makers should be cognisant of the full impacts of higher
tobacco taxes and consider the costs of as well as the benefits of higher taxation.

Dannyboy83

That also assumes that 100% of cigarettes imported illegally would otherwise have come in and been traded legally. I don't think we can really claim that, given the high cost of approved cigarettes.

Well, that's the point



Open to correction, but I don't think there has been any significant shift in the ratio of smokers:non-smokers among the Irish population.

later12

Dannyboy83 wrote: »

Because revenue are working on out-of-date figures

Explain? Apart from the fact that I would think most people should be wary of accepting unsubstantiated figures by interested parties like the tobacco manufacturers, who also fund groups like "Retailers Against Smuggling", I don't see anything on the Tobacco Manufacturers' website which dates their evidence.

when is ITMAC's suvey dated?

and are working off a lower estimate for smuggling

The fact that Revenue are using a lower estimate is not in itself a good reason for distrusting the Revenue estimate over the Tobbaco Manufacturers' estimate.

As I said, there are problems with the way that both Revenue and ITMAC compile their estimates on losses. As far as I can see, both estimate 100% substitution of €9 (legal) packs if all €3 (illegal) packs were magicked away. That is to say, they appear to ignore the price elasticity of demand.

You also have to consider related problems apart from price elasticity of demand ; young people can buy cigarettes from the illicit trade, but they cannot buy them in retail stores.

Put simply, it is a mistake to assume that an eradication of consumption of illicit cigarettes would increase the measure of the consumption of legal cigarettes by a corresponding amount.

later12

Dannyboy83 wrote: »

Open to correction, but I don't think there has been any significant shift in the ratio of smokers:non-smokers among the Irish population.

That's irrelevant. A smoker is unlikely to consume as many €9 packs in 7 days as he would of €3 packs.

beeno67

Dannyboy83 wrote: »

Well, that's the point



Open to correction, but I don't think there has been any significant shift in the ratio of smokers:non-smokers among the Irish population.

http://www.otc.ie/research.asp
These figures only refer to 2008 on, showing a definite decline in numbers of smokers. Figures going back 10, 20, 30 years are more impressive but I can't be arsed trying to find the figures. The rate of smoking is definitely declining. It is even more impressive given our young population. Smokers tend to start young and then many quit as time goes by

By the way, how old are your figures. I thought cigs in UK were more expensive than here?

Just to edit: uk prices are higher than here as this map shows
http://www.itmac.ie/?content=price-comparison-of-cigarettes-in-europe

Dannyboy83

later12 wrote: »

As I said, there are problems with the way that both Revenue and ITMAC compile their estimates on losses. As far as I can see, both estimate 100% substitution of €9 (legal) packs if all €3 (illegal) packs were magicked away. That is to say, they appear to ignore the price elasticity of demand.

You also have to consider related problems apart from price elasticity of demand ; young people can buy cigarettes from the illicit trade, but they cannot buy them in retail stores.

I accept your argument regarding the lobby.

I abhor the use of similar tactics by the Irish Language Lobby, so it could be considered hypocritical of me to defend the ITMAC here, in which case I agree that the Revenue figure would be the more prudent figure to use.

I'm not going to pretend that government departments do not massage figures, but I don't care enough to argue the point tbh.

Besides there are other problems - such as a €3 box of cigarettes.
The last time I smoked, only Ukranian cigarettes cost €3 but smokers will only smoke those as a last resort, because of lower quality (and they taste of nail varnish, lol).

Polish/Lithuanian/Estonian cigarettes cost 4.50/5 and smokers are willing to pay more for higher quality. They always sell out first.

Put simply, it is a mistake to assume that an eradication of consumption of illicit cigarettes would increase the measure of the consumption of legal cigarettes by a corresponding amount.

This would be the ideal outcome imo.

If illict cigarette consumption decreases and legal cigarette consumption doesn't increase - that likely means more people are giving up smoking.

Speaking as a former smoker myself, the increase of the price of legal cigarettes was not the ultimate deterrent which caused me to stop smoking.
The increase in the price of contraband cigarettes was (coupled with the ever increasing difficulty of getting them due to demand)

Ultimately, I think it's immoral to attempt to profit off this addiction.
The revenue should be used to subsidize NRT treatment and related medicines for addicts.

Dannyboy83

beeno67 wrote: »

http://www.otc.ie/research.asp
These figures only refer to 2008 on, showing a definite decline in numbers of smokers. Figures going back 10, 20, 30 years are more impressive but I can't be arsed trying to find the figures. The rate of smoking is definitely declining. It is even more impressive given our young population. Smokers tend to start young and then many quit as time goes by

Absolutely regarding the 30 year span - no dispute there.
The economist had some good articles on it recently:

http://www.economist.com/blogs/graphicdetail/2012/03/daily-chart-14
A 26% decline in Western Europe since 1990.

But the link you've shared shows there was only a 4% decline among males/females in Ireland in recent years despite the fact that we have increased the price to among the most expensive cigarettes in the European Union in the same time period.


With 25% of males smoking, we are still far ahead of countries such as the USA, where cigarettes are significantly cheaper.

It seems there must be other, more significant factors in encouraging people to quit. Social factors of course, which we can't influence really.
Other which we can influence tho - looking at the cost of NRT would be a good start imo.

By the way, how old are your figures. I thought cigs in UK were more expensive than here?

Just to edit: uk prices are higher than here as this map shows
http://www.itmac.ie/?content=price-comparison-of-cigarettes-in-europe

Thanks.
I was in Hertfordshire on Monday and cigarettes were available for GB£5.90 (and petrol was GB£1.31 incidentally) so I'm at a loss with regard to the chart has been compiled.

Solair

My gut instinct on those figures for Ireland is that they seem too high.
Just thinking about a typical nightclub, 25% of the males don't smoke. It's more like maybe 10% - 15% or so in my experience.

I'd like to know how the data's gathered.

Dannyboy83

Solair wrote: »

My gut instinct on those figures for Ireland is that they seem too high.
Just thinking about a typical nightclub, 25% of the males don't smoke. It's more like maybe 10% - 15% or so in my experience.

I'd like to know how the data's gathered.

I would have said the same, and the figures for women seemed far too low.
I worked as a doorman in various smoking areas for years and the number of women smoking always vastly outnumbered the men.

But the figure cited is actually too low for the age group you're referring to:




The figures cited by the economist surprised me far more in honesty.
From my experiences in Eastern European, I was under the impression that virtually every Polish female smoked, while considerably less maless smoked, and I saw this pattern repeated across numerous EE countries.

Godge

Chazz Michael Michaels wrote: »

Some good breakdown here:

http://trueeconomics.blogspot.fr/[/QUOTE]



Is this the same economist who predicted that we would default by the end of the week nearly two years ago?

Godge

Chazz Michael Michaels wrote: »

The underlying deficit (i.e. excluding banking support measures) in 2011 is now estimated at 9.0% of GDP below the 10.6% of GDP limit set under the EU/IMF Programme.

Tax revenues to end-August, at just under €22.1 billion are €365 million (1.7%) ahead of target. At end-August three of the “big four” sources of tax revenue are ahead of profile.

http://www.finance.gov.ie/documents/exchequerstatements/2012/infonoteaug2012.pdf


Do meeting these targets make any difference, do you think? Or will potenital events in the EZ make it all for nothing?

getting back on topic amid the haze of cigarette smoke, I think the figures are very interesting.

We are well ahead of profile but August is slow in comparison to earlier in the year. If this continues into September and October, I think we still have done enough to hit the 10.6% but next year's target will be difficult.

However, if August is a blip and the rest of the year is like the first six months of the year, yes we could hit 9% and with the full year buoyancy, this could make the December budget a little bit easier. Certainly, it would mean that if we got the €3.1 bn done in December, that 2014 and 2015 budgets would definitely be better than the last few.

To sum up, September's figures will be interesting.

antoobrien

Godge wrote: »

getting back on topic amid the haze of cigarette smoke, I think the figures are very interesting.

We are well ahead of profile but August is slow in comparison to earlier in the year. If this continues into September and October, I think we still have done enough to hit the 10.6% but next year's target will be difficult.

However, if August is a blip and the rest of the year is like the first six months of the year, yes we could hit 9% and with the full year buoyancy, this could make the December budget a little bit easier. Certainly, it would mean that if we got the €3.1 bn done in December, that 2014 and 2015 budgets would definitely be better than the last few.

To sum up, September's figures will be interesting.

The CSO have published the 2011 National Income & Expenditure Report - it shows that GDP rose by 1.6% last year (it was expected to be considerably less).

It means that we are further ahead of profile than we though we were in both the Deficit/GDP and Debt/GDP ratios. Does it mean we have less cuts to make - no, but it does mean that the spending cuts we have seen so far are not doing the damage that was feared.

There's another interesting nugget in there. Personal consumption of goods & services (i.e. consumer spending) is relatively stable, dropping by less than €2bn since 2009 (it dropped 9bn in 2009). Given the amount of consumer credit (excluding mortgages) has dropped by 7 billion - probably due to paying off loans instead of topping them up, as well as writeoffs - it's remarkable that the spending levels are holding up at all.

Godge

antoobrien wrote: »

The CSO have published the 2011 National Income & Expenditure Report - it shows that GDP rose by 1.6% last year (it was expected to be considerably less).

It means that we are further ahead of profile than we though we were in both the Deficit/GDP and Debt/GDP ratios. Does it mean we have less cuts to make - no, but it does mean that the spending cuts we have seen so far are not doing the damage that was feared.

There's another interesting nugget in there. Personal consumption of goods & services (i.e. consumer spending) is relatively stable, dropping by less than €2bn since 2009 (it dropped 9bn in 2009). Given the amount of consumer credit (excluding mortgages) has dropped by 7 billion - probably due to paying off loans instead of topping them up, as well as writeoffs - it's remarkable that the spending levels are holding up at all.

I agree with most of what you have to say but I do believe it does mean we have less cuts to make. Why?

Two reasons. One is tax buoyancy. As the economy grows in nominal terms (which must have been close to 3% last year because of inflation), so does tax revenues. At the same time the debt/GDP ratio falls because of the same effect.

If we can continue to maintain nominal growth in GDP, we may need less cuts in 2014 and 2015. However, I would agree that both for confidence reasons and to ensure that this pattern of growth is not a mirage, Budget 2013 needs to stick to its already stated targets.

Cheerful Spring

Dannyboy83 wrote: »

That excise figure in particular should be signalling a warning to the government.

Ireland has the most expensive cigarettes in Europe: Ireland is the cigarette smuggling Capital of Europe.

1 in every 4 cigarettes sold in Ireland are sourced from the black market.The State is losing €526 million a year through illegal tobacco, which is smuggled into Ireland and sold without any government taxes or duties.

Fuel smuggling is moving closer to at crisis point
Based on estimates that one in every eight litres of diesel sold in Ireland is illegal, Fuel laundering costs an estimated €155 million in tax losses – .

Smoking is a choice if people want to smoke its their choice their bodies. Respect for other people was the only thing that was needed here and that's why we have smoking ban.

Obviously smoking is dangerous but how many smokers are there and how many die each year. Like i said its a choice and we shouldn't be taxing choices people make just to fund our economy.

djpbarry

Cheerful Spring wrote: »

Like i said its a choice and we shouldn't be taxing choices people make just to fund our economy.

Suppose tax on cigarettes is abolished. Or at least significantly reduced. If I smoke myself to lung cancer, it's cool with you if other taxpayers pick up the tab because I don't have private health insurance?

Cheerful Spring

djpbarry wrote: »

Suppose tax on cigarettes is abolished. Or at least significantly reduced. If I smoke myself to lung cancer, it's cool with you if other taxpayers pick up the tab because I don't have private health insurance?

Is it that significant of a problem to tax cigarettes as much as there been taxed now? Do other countries not have same problem but tax their cigarettes much lower.

How many smokers are there in Ireland and how many die each year from a cigarette related illness? If more live than die are we not overreacting? It doesn't excuse the fact people do die from an illness that could be avoided possibly if they hadn't smoked. But the reality is some people are more genetically at risk with their smoking compared to others, but we have know why have testing these people prior to them being diagnosed with this disease.

antoobrien

Godge wrote: »

However, I would agree that both for confidence reasons and to ensure that this pattern of growth is not a mirage, Budget 2013 needs to stick to its already stated targets.

Also to prove that things have changed. If it was a FF, SF or ULA policy it'd be rightly described as an attempt to placate/buy voters.

Personally I think it's too early to scale back on cuts, as if growth tapers (a real possibility at the moment) all we'll have done is delayed cuts. Recent surveys have indicated that consumers are getting back a bit of confidence (they must think it can't get any worse at this stage). If a relaxation backfired it'd have the potential to cause a (smaller) 2009 style spending stop. We will end up at a lower level of spending (we have to) but at least if we spread the cuts out we should have a chance to get used to the new levels.

A second reason that I think it' be wrong to relax on cuts would be the potential to undermine the new tax measures and reforms that need to be introduced.

djpbarry

Cheerful Spring wrote: »

Is it that significant of a problem to tax cigarettes as much as there been taxed now?

I don’t know – there is probably a case to be made for it being too high. However, it’s probable that a case could also be made for it being too low elsewhere in Europe. Bear in mind that Ireland was one of the first countries in the world to introduce a smoking ban. Furthermore, most countries do not have a complete ban like the UK and Ireland – for example, smoking in restaurants is still legal in most of Europe. The point here is that it’s all very well saying that taxes on tobacco are higher in Ireland relative to the rest of Europe, but the general attitude toward smoking is different in Ireland relative to the rest of Europe and this must be taken into consideration.

Anyways...

The point of raising taxes is to fund public services. Now, consider that one in every two smokers will die from a tobacco-related illness. Treating such illnesses has been estimated to cost the HSE somewhere between €1 and €2 billion annually. With that in mind, a significant level of tax on tobacco products is entirely justified in my opinion.

djpbarry

djpbarry wrote: »

The point of raising taxes is to fund public services. Now, consider that one in every two smokers will die from a tobacco-related illness. Treating such illnesses has been estimated to cost the HSE somewhere between €1 and €2 billion annually. With that in mind, a significant level of tax on tobacco products is entirely justified in my opinion.

And with 20 years off life expectancy by smoking that's about a quarter of a million per smoker saved in pension funding. And the people who don't die from a cancer-related disease will still die and most likely still have drawn-out deaths, take up spots in nursing homes etc.

It was said on Vincent Brown last night that the government are probably regretting not making more cuts last year when they could still blame the last crowd and we'd be even further ahead of targets.

Dannyboy83

Smoking is a choice if people want to smoke its their choice their bodies. Respect for other people was the only thing that was needed here and that's why we have smoking ban.

Obviously smoking is dangerous but how many smokers are there and how many die each year. Like i said its a choice and we shouldn't be taxing choices people make just to fund our economy.

I would agree with your core point, but our approach seems to be to tax everything regardless of a positive or negative effect.


For example, irish consumers pay vat on whey powder which is part of a healthy lifestyle, despite rocketing obesity and diabetes figures.
Recently the uk introduced vat on whey while witholding the pasty tax.

We do not consider any factor other than revenue in reality.
Profit is the bottom line.

Chazz Michael Michaels

Yeah, this is a thread about smoking, alright...