Exchequer boost for Government ahead of Budget 2020
Key issue is whether Minister for Finance will opt to plan for a crashout Brexit budget
More leeway: Minister for Finance Paschal Donohoe has had some good news regarding his budgetary arithmetic.
The Government will come under renewed pressure for tax cuts in next month’s budget, with the latest exchequer returns showing it has raised an extra €2.6 billion in taxes so far this year.
Exchequer figures for the eight months to the end of August show the Government collected just over €35 billion in taxes. This was €233 million (0.7 per cent) ahead of projections and €2.6 billion up on last year, leaving Minister for Finance Paschal Donohoe with potentially more leeway in Budget 2020.
However, the key issue is whether he will decide to plan for a crashout Brexit budget, curtailing potential tax cuts and additional spending or proceed on the basis that the UK will have an orderly exit. He is due to decide next week.
The latest exchequer numbers show corporation tax was once again a star performer, generating €4.9 billion, which was €314 million or nearly 7 per cent above profile.
The business tax has generated record revenues in recent years and is on course to do so again this year.
However, the Government has been repeatedly warned not to use the current surge in these receipts to fund permanent day-to-day spending measures because of its inherent volatility and because so much of it stems from a handful of big US multinationals.
VAT receipts for the eight-month period came in 1.4 per cent below profile at €9.9 billion amid concern the current Brexit uncertainty may be hurting consumer spending.
The Department of Finance, however, played down the weaker VAT returns, noting that August was a non-VAT due month and that receipts were still up in year-on-year terms.
Income tax receipts, the Government’s largest revenue source, raised just over €14 billion, which the department said was “in-line with target”.
The public finances were also boosted by excise duty, which was behind target for most of last year due to the introduction of plain packaging for tobacco products, but has exceeded expectations in 2019. It generated €3.9 billion, 3 per cent ahead of target.
The figures gave rise to an exchequer deficit of €625 million for August, compared to a deficit of €1.8 billion at the same point last year. The €1.2 billion year-on-year improvement was driven by increases across all revenue streams, the department said.
On the spending side, total net voted expenditure was just under €34 billion for the eight-month period, which was up €2.1 billion or 6.8 per cent in year-on-year terms. This was broadly in line with profile, below by 1.1 per cent or €365 million, the department said. The State’s debt servicing costs amounted to just over €4 billion, a year-on-year decrease of €172 million on 2018. Health spending was running €68 million below profile, but is still expected to end the year up 7.5 per cent – €1.1 billion – on last year.