Tax receipts come in ahead of target

Tax collection rose by €478 million in the first two months of the year as the public finances took the benefit of increased employment and surging car sales.

Exchequer figures show that Revenue collected €7.2 billion by the end of February, 7.1 per cent more than than in the same two months last year.

The rate of increase was higher than the 5.8 per cent foreseen in the October budget for the entire year. However, the January-February data show the return was €34 million or 0.5 per cent behind the Department of Finance target.

There was a blip in VAT returns. Data show that €310 million VAT collection in February – a non-VAT due month for traders – was €109 million lower than in the same period in 2015.

This has been attributed to higher VAT repayments by Revenue to traders as they increase stocks. VAT receipts in the year to date stand at €2.41 billion, €43 million more than in the first two months of 2015.

Expenditure control

At the same time, the figures reflect tight expenditure control. Although €6.56 billion net spending was €56 million lower than forecast, any spending overruns typically do not arise until the later months of the year.

The exchequer was in surplus to the tune of €310 million at the end of February, a figure which was in contrast to the €205 million deficit recorded in the opening two months of 2015.

“This €515 million improvement in the exchequer balance is driven by increased tax receipts and reduced expenditure,” the department said.

“Overall, the release shows the Government broadly on track to hit its fiscal target this year,” said Davy economist David McNamara.

“An important point to remember is that the impact of any change in fiscal policy by the next government will not be felt in the numbers until 2017, while EU rules will limit any radical change in course.”

Peter Vale, tax partner at Grant Thornton, said the data would give comfort tothe next minister for finance that the public finances were in good shape. He argued, however, that the reliance on income tax as a percentage of all taxes was too high.

Income tax

Income tax receipts to end-February reached €3.14 billion, up €251 million or 8.7 per cent on the same period in 2015 .

“This performance is consistent with the recovering labour market, employment growth and increases in the average weekly earnings as evidenced by the latest quarterly national household survey and earnings releases,” the department said.

Excise duties reached €946 million in the first two months, a €168 million or 21.6 per cent increase on 2015. “A contributory factor is an increase in car sales which has boosted VRT receipts,” said the department.

Corporation tax receipts stood at €248 million for the first months, largely on target after a big rise in payments during 2015.

Total exchequer debt servicing costs to end-February 2016 were €422 million, down €169 million or 28.6 per cent on the same period last year .

“This decrease is primarily due to lower interest payments on International Monetary Fund loans following the completion of early repayments in March 2015,” the department said.

It also cited “timing factors” around interest payments on loans from the European Financial Stability Facility, the euro zone rescue fund from which Ireland drew big loans during the EU/IMF bailout.

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