Christmas comes early for exchequer thanks to self-employed

Strong tax returns from the self-employed have boosted the exchequer and mean targets for the public finances in 2016 are now likely to be met. Income tax was almost 9 per cent ahead of target for November, the key month for self-employed tax payments.

It was also a strong month for corporation tax, which was more than 8 per cent ahead of its monthly target and is now close to €1 billion higher than expected for the year. The strong performance of corporation tax remains the key factor behind the overall outperformance of tax revenues. VAT returns remain weaker than anticipated, however, and are more than 3 per cent below expectations for the first 11 months.

Overall tax receipts so far this year at €44.684 billion are now €790 million or 1.8 per cent ahead of target. For the first 11 months, the exchequer recorded a surplus of €1.521 billion, compared to €343 million last year. Spending is running below target, but the Department of Finance says this reflects timing factors which are expected to reverse in December.

There had been some weakness in tax revenues in recent months, leading to the department warning a month ago that tax targets would have to be met in the key months of November and December to provide funds for the Government’s increased spending commitments.

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Relief

The latest figures will thus come as some relief, indicating that the tax targets should now be met, or possibly exceeded, for the year. In turn, the trends in the figures provide some reassurance for the outlook for 2017.

Income tax had slipped below its target level for the year in recent months, but the monthly returns in November alone were €252 million ahead of expectations and income tax is now almost 1 per cent ahead of expectations for the first 11 months. The department said the November boost “includes higher than expected Schedule D (self-employed) tax receipts”.

November is also a key month for corporation tax and here the pattern of exceeding targets continues, with returns €991 million higher than expected at €7.062 billion for the January to November period and more than 11 per cent ahead year on year. However, the department cautioned that there are a number of corporation tax repayments due to be made to companies in December, which could reduce receipts next month.

VAT receipts

The Government had expected a better year for VAT receipts, but they are now running €412 million below target for this point. However, this is still €556 million, or 4.7 per cent, ahead of 2015 levels.

On the spending side, total voted expenditure at €38.735 billion was just over €1 billion – or 2.7 per cent – higher than 2015, though it remained 2 per cent below the expected level. However, the Department of Finance said this reflects timing factors which are expected to unwind in December, particularly in the Department of Agriculture, Food and the Marine and Health.