Government’s tax revenues on target for first time this year
Latest exchequer numbers suggest public finances are back on track
Minister for Finance Paschal Donohoe. Stronger-than-expected corporation tax receipts have been making up for shortfalls in income tax and VAT. Photograph: Dara Mac Dónaill
The Government’s finances are back on track with the latest exchequer returns showing tax receipts ahead of target for the first time this year.
The figures for October, published by the Department of Finance yesterday, show the Government collected just under €39 billion in taxes for the first 10 months of 2017.
Tax receipts had been running below profile since the start of the year largely because of a weaker-than-expected trend in income tax, although this has been blamed on a tax-modelling error within the department.
Either way, the gap between actual and projected tax receipts has now been bridged with stronger-than-expected corporation tax receipts making up for shortfalls in income tax and VAT.
Overall, tax revenue is 6.2 per cent or €2.28 billion higher than in the same period last year. Corporation tax generated €5.4 billion for the Government during the 10-month period, which was €216 million or 4 per cent ahead of the department’s forecast.
Income tax, the Government’s largest tax stream, came in 1 per cent or €153 million below profile at €15.2 billion while VAT, which reflects consumer spending, generated €11.2 billion, which was also 1 per cent or €118 million below target.
Monthly VAT receipts for October were €82 million or 29 per cent worse than expected, which the department blamed on higher-than-expected repayments.
A spokesman said the below-par performance in VAT is likely to unwind in November when the self-employed file their tax returns.
Excise duty, the other main tax head, performed strongly, generating €4.9 billion, which was 1 per cent above profile, but this was linked to the stocking-up of tobacco products in advance of the introduction of plain packaging.
The latest returns resulted in an exchequer surplus of €326 million compared with a deficit of €2.4 billion for the same period last year, with the improvement attributed to the recent AIB share sale.
Expenditure for the 10-month period was €36.7 billion, which was 1 per cent or €386 million below profile but 5 per cent or €1.7billion up in year-on-year terms.
“Corporation tax continues to prop up much of the growth in our tax receipts, with October again a strong month. While positive, we can’t ignore the longer-term threats to our corporate tax base, with the EU in particular seeking changes that would adversely impact smaller countries such as Ireland,” said Peter Vale, tax partner with Grant Thornton.
“Longer term, an increase in tax revenues from wealth taxes, such as property tax, would act as a hedge against a fall in the corporate tax take. For the moment, however, such a move looks unlikely and we have to hope that the proposed EU changes lose momentum so that corporation tax continues to outperform,” he said.