Anxious wait for budget wriggle room
Cantillon: Exchequer numbers still lagging Department of Finance targets
Leo Varadkar and Paschal Donohoe: if they want to do anything significant in the budget they will have to find new revenue. Photograph: Dara Mac Dónaill
Tax returns were strong in the month of June, easing fears of a shortfall for the year as a whole. However, the July figures were again a bit behind target, meaning receipts for the year so far are 0.8 per cent below expectations.
This shortfall may well be wiped out by strong self-employed returns in the autumn, but the Government will face an anxious wait to see if it can upgrade its estimates for tax revenue for 2018 – and thus give itself a bit more room for manoeuvre in the October budget.
Tax revenues are running 4.5 per cent ahead of last year, a reasonable increase, but not quite as much as had been anticipated.
Looking at July, there will be some reassurance that income tax – which was weak in the early months of the year – came in on target.
The main taxes behind target for the month were VAT and corporation tax. The strength of the economy would not suggest that weakness in either of these two taxes should persist. And, indeed, for the year as a whole VAT is well ahead of target.
With most of the economic indicators pointing to strong growth, it would be a surprise if taxes were not on target by the time the budget is delivered. However, there is nothing to suggest that they will provide the Government with a “get-out-of-jail free” card in relation to the budget sums.
The receipts from the recent sale of AIB shares boosted the figures, but this money is to be used to pay down part of the national debt.
Some more money may be found behind the official sofa to ease the budget sums a little bit. However the bottom line remains that if Leo Varadkar and Paschal Donohoe want to do anything significant in the budget they will have to find new revenue – either by increasing some taxes or charges, or by cutting spending programmes.
And with the current delicate political balance in Leinster House, every yard in that battle will be hard fought.