Public finances registered a significant drop in the deficit in the first three months despite the taxman collecting €12.4 million less in income tax.

Figures out yesterday showed that the deficit in March stood at €85 million, a 62 per cent drop when compared to the same period last year.

The deficit reduction came on the back of higher proceeds and lower expenditure. Tax proceeds amounted to €137 million more in the first quarter when compared to last year despite a drop in income tax as a result of a cut in the top rate to 25 per cent for those earning less than €60,000.

The National Statistics Office said income from customs and excise taxes shot up by €18 million, while VAT and social security contributions registered increases of €9.8 million and €4 million respectively.

Revenue was also boosted by €124 million in grants, nearly six times higher than the amount recorded last year. Expenditure in the first quarter stood at €860 million, a slight drop of €3 million when compared to the same period a year ago.

Recurrent expenditure increased by €2.5 million, driven by higher outlays on public sector wages to the tune of €10 million. These were mitigated by declines in spending on social security benefits (-€9.4 million), feed-in-tariff (-€5 million) and medicines and surgical materials (-€3 million).

Capital expenditure stood at €88.4 million, down from €96.7 million last year. The NSO said this was mainly due to lower equity injection in the national air carrier.

However, the government spent €7.1 million on the acquisition of property for public purposes.

The NSO said the government paid €56.3 million in interest on public debt, which stood at €5.4 billion by the end of March.