Strong Christmas sales drive VAT receipts to record level

Exchequer returns show €2.4bn VAT collected in January, surpassing pre-crash peak

While official retail sales figures for December have yet to be released, Irish consumer spending is thought to have been driven higher by rising wages. Photograph: Alan Betson

While official retail sales figures for December have yet to be released, Irish consumer spending is thought to have been driven higher by rising wages. Photograph: Alan Betson

 

VAT receipts hit a record €2.4 billion in January as strong pre-Christmas sales boosted the Government’s tax take for the month.

Exchequer returns show Revenue collected just over €5 billion in January, an increase of 5 per cent on last year.

Nearly half the total came from VAT, which generated €2.4 billion, surpassing the 2008 pre-crash peak of €2.34 billion.

January is typically the biggest month of the year for the sales tax as it reflects the busy November-December shopping period.

While official retail sales figures for December have yet to be released, Irish consumer spending is thought to have been driven higher by rising wages.

The latest exchequer numbers show income tax was also strong, generating €1.75 billion, which represented a year-on-year improvement of 6.6 per cent, or €108 million.

Corporation tax receipts, which hit record levels last year, came in at just €25 million, which equates to a €39 million decrease when compared to January 2017.

However, the Department of Finance noted that January was typically a quiet month for the business tax.

Excise duties

Excise duties amounted to €478 million in January, representing a marginal year-on-year increase of approximately 2.3 per cent, or €11 million.

While monthly tax returns fluctuate, the data show the exchequer was in surplus by €1.53 billion last month compared with a €1.47 billion surplus 12 months previously.

Total net voted expenditure was just under €4 billion for the month, up 3.7 per cent or €140 million year-on-year.

Health spending was up 11 per cent at €1.35 billion in January amid concern the department may struggle to stay within its allocated budget.

Despite receiving an increase of nearly €600 million this year, according to official correspondence, the HSE is worried it will face an unprecedented cash crisis by the end of 2018.

Non-voted current expenditure, excluding debt servicing costs, of €287 million, was up €70 million or 32.6 per cent in year-on-year terms.

The increase was “wholly attributable” to a rise in the EU budget contribution, the department said.

Christmas spending

Commenting on the latest figures, Peter Vale, tax partner with Grant Thornton, said: “Despite some concerns around Christmas spending, VAT receipts surged over the Christmas period, indicating strong consumer spending.

“Consumers appeared to set aside Brexit and other concerns, resulting in VAT receipts that were over 5.7 per cent higher than what was a strong January 2017 performance,” he said.

“The big question is the sustainability of our tax receipts, particularly the corporation tax numbers. Will the US tax reform package eat into our slice of foreign investment and resultant tax revenues?” Mr Vale said.

“Our view continues to be that the strong corporation tax growth witnessed in recent years will hold up, despite changes in the US and elsewhere,” he said.

Davy analyst David McNamara said the latest returns show that the public finances began the year on a “solid footing”.