Limp exchequer numbers: should we be worried?

Irish brokers remain divided over whether the worse-than-expected exchequer numbers for March represented a significant change in the Government’s finances.

The figures showed the Government’s tax take for the first three months of year was 2.4 per cent or €282 million behind target on account of softer income tax and corporation tax receipts.

Dermot O’Leary of Goodbody took the hardest line, suggesting progress had stalled on Ireland’s budget deficit reduction journey in the first quarter of 2017.

“The Q1 figures provide somewhat of a warning signal to the Government ahead of the publication of the Stability Programme Update next week,” he said.

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“While it is still early in the year, these trends suggest a need for conservatism,” Mr O’Leary said.

Investec’s Philip O’Sullivan noted that the “somewhat surprising out-turn” ran counter to the strong employment growth in the economy.

However, he said the underlying economic performance remained “very healthy” with headline economic growth expected to be in the region of 4.6 per cent this year.

Davy analyst Conall Mac Coille took a similar line, suggesting strong employment growth meant the current exchequer weakness was likely to be "temporary".

He also said it was too early to pick up a trend in corporate tax revenues, which 40 per cent below target in March.

“Corporate revenues are always volatile and lumpy, and the key collection months for these taxes are June, November and December, so it is far too early to discern a clear trend,” he said.

Minister for Finance Michael Noonan acknowledged the receipts were slightly behind expectations for the year to date.

"The Department of Finance will monitor that and the Government will ensure that taxes can be set at an appropriate level and vital public services can be paid for," he said.