Bumper corporation tax receipts boost exchequer numbers
Latest returns for November show public finances are running €200m ahead of target
Minister for Finance Paschal Donohoe. Photograph: Brenda Fitzsimons
Another surge in corporation tax receipts in November, a key month for the business tax, has put the Government on course to exceed its budgetary targets for the year.
Exchequer returns for the first 11 months of 2017 show the Government collected just under €47.3 billion in taxes, which was €192 million or 0.4 per cent above profile for the year.
Corporation tax generated €7.65 billion, which was €396 million or 5.5 per cent ahead of the department’s own forecast. On a monthly basis, the business tax came in 9 per cent ahead of target at a near record €2.2 billion.
While the figures do not provide a detailed breakdown of what sectors are driving the strong performance in corporation tax, strong multinational returns are thought to be behind the latest pick-up.
Either way, the overperformance was enough to offset a weaker-than-expected trend in income tax, the Government’s largest tax stream, which came in €251 million (-1.4 per cent) below profile at €18.3 billion.
The below-par performance in income tax is at odds with the growth in employment in the labour market.
November is the most important month for Government tax revenue, with the largest targets set for income tax, corporation tax and VAT.
Revenue from the sales tax for the 11-month period was €13.2 billion, which was broadly in line with projections, while VAT receipts in November – the last “VAT Due” month in the year – were up 4 per cent at €1.9 billion.
Excise duty, the other main tax head, performed strongly, generating €5.57 billion by end of November, which was 2 per cent above profile. This was linked to the stocking-up of tobacco products in advance of the introduction of plain packaging.
Overall, tax revenues were 5.8 per cent higher than this time last year, corresponding to an increase of €2.6 billion.
The latest returns resulted in an exchequer surplus of €4.6 billion compared with a surplus of €1.5 billion for the same period last year, with the improvement attributed to the recent sale of more than 28 per cent of the State’s shareholding in AIB.
Expenditure for the period was €40.6 billion, which was nearly 2 per cent or €788 million below target, but up 5 per cent or €1.9 billion in year-on-year terms.
Commenting on the latest exchequer data, Peter Vale, tax partner with Grant Thornton, said that overall November was a strong month for tax receipts, with corporation tax and VAT performing particularly strongly.
“A lingering concern will be income tax figures that continue to somewhat disappoint. While ahead of last year, they continue to lag behind forecast despite the surprisingly buoyant jobs data,” he said.
Probably the standout figure in November is corporation tax receipts, now up 8.4 per cent on what was a strong 2016, he said.
“While there is little detail behind the numbers, it is widely expected that strong multinational returns in particular are propping up the numbers,” Mr Vale said.
“We don’t expect US tax reform to have a material impact on future corporation tax receipts here. Indeed, it is possible that the US tax changes may even bring forward some of the recent ‘onshoring’ of intellectual property, which could have further benefits for Ireland, particularly given the recent trend for IP transfers to be linked to jobs,” he added.