November tax revenues short of expectations
Weaker tax revenue growth in the second half of the year continued in November, according to the latest exchequer returns published yesterday by Department of Finance.
Despite this, and continued overruns in health and welfare spending, the Government will remain within the deficit limits for the full year under the terms of its EU-International Monetary Fund bailout.
In November, the most important month for revenues, tax receipts were 5.5 per cent above the same month last year, but this was only half the increase expected.
Over the 11 months to November, tax revenues are €171 million, or 0.5 per cent, behind target.
Compared with the same period in 2011, tax revenues at €33.8 billion were almost €2 billion, or 6.2 per cent, ahead .
The increases were attributable to tax hikes introduced in the last budget. The lower-than-projected returns reflect a slightly-weaker-than-expected economy. More specifically, the main reason for the lower-than-expected tax revenues was a €300 million income tax shortfall in the month due to disappointing revenues from the self-employed.
Mark Redmond of the Irish Tax Institute said the drop in income tax returns was a clear sign the self-employed sector was struggling. “What we are seeing in the November figures is a real and ongoing issue with ‘ability to pay’ amongst small businesses who are currently trying to keep their doors open and maintain employment levels. We will need to see some measures in the budget that will help this sector to withstand the current economic difficulties and become the indigenous job creators of the future.”
Income tax revenues were over €230 million, or 1.6 per cent, behind departmental expectations in the year to the end of November. This, however, represented a 4.5 per cent year-on-year increase.
Value added tax was again ahead of expectations last month, continuing a trend over the year. Cumulatively, over the first 11 months VAT revenues were up by 4.4 per cent on the same period a year earlier. The standard VAT rate was hiked from 21 per cent to 23 per cent a year ago.
Corporation tax revenues were only marginally behind expectations by €21 million (0.5 per cent), at €3.8 billion.
Excise duties, the fourth of the major tax sources, were 4.2 per cent, or €179 million, below target in the 11 months to the end of November.
On the spending side over the first 11 months, total net voted expenditure, at €40.6 billion, exceeded the target by 0.6 per cent or €249 million.
Most departments spent less than the ceilings set, but welfare and health continued to overshoot. As in recent years, capital/investment spending by the State has run considerably behind budget.
Lamenting the effects on his sector and criticising the Government, the Construction Industry Federation’s Tom Parlon said “an additional €405 million should have gone towards capital spending in the year to date, but instead it has gone to paying for the lack of control in current spending by various departments”.
Debt-servicing costs continue to soar. In the first nine months of the year, the State spent €5.7 billion on interest payments. This was 46 per cent up on 2011.