Tax revenue boosted by pick-up in retail over Christmas
Exchequer returns show almost €6.8bn in taxes collected in first month of 2017
Corporation tax maintained its solid path in January. Photograph: iStock
Tax revenue in January was more than 6 per cent up on last year thanks to a pick-up in consumer spending over Christmas, which boosted VAT receipts.
The latest monthly exchequer returns show Revenue collected almost €6.8 billion in the first month of 2017, some €272 million more than last year.
The strong start to the year was primarily down to the performance of VAT, which netted the exchequer €2.3 billion,.
This was 10.2 per cent up on the same period last year, reflecting a more buoyant Christmas trading season with total VAT receipts only marginally below the 2008 pre-crash peak of €2.34 billion.
Income tax, the Government’s largest tax head, was marginally up on January last year at €1.64 billion. Within this, PRSI receipts were 2.5 per cent up at €671 million, reflecting strong growth in the labour market during the period.
Conversely, excise duty was down 6.5 per cent at €467 million, mainly due to weak tobacco receipts. This was largely seen as a timing issue, however, as excise duties on tobacco were front-loaded at the start of last year ahead of the Government’s plain packaging initiative.
Corporation tax, the main reason for the exchequer’s over-performance last year, continued on a solid path with receipts for January up 168 per cent up at €64 million, although January is not a significant month for corporation tax.
The Government remains confident that the current corporation tax performance, which came in €737 million ahead of expectations in2016, can be maintained despite worries that changes to the US tax code under Donald Trump may adversely affect Ireland.
While monthly tax returns fluctuate, the data show the exchequer was in surplus by €1.47 billion last month compared with a €1.2 billion surplus one year previously.
Total gross voted expenditure reached €3.8 billion in the month, up 4.8 per cent or €173 million on last year.
Among the bigger spending departments, health spending was down 5.9 per cent at €1.2 billion while social protection was up 1.8 per cent at €1.6 billion.
Exchequer debt servicing costs in January were €243 million, compared to €255 million last year, a year-on-year decline of 4.5 per cent.
The figures suggest tax collection continues to run ahead of target, although the full profile of expected monthly receipts will not be published until later this month.
In October’s budget, the Government said it was targetting a 5.8 per cent increase in taxes in 2017, which is inside the 6.2 per cent increase in January.
Peter Vale, tax partner at Grant Thornton, said despite concerns that Christmas spending was less buoyant than expected, 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 10 per cent higher than the same period last year,” he said.
“Sustainability of tax receipts has received significant focus, particularly in the context of corporation tax. At this point, it is our view that the strong corporation tax receipts witnessed in 2016 will be replicated in 2017, with a shift in corporate profits away from offshore havens to onshore locations such as Ireland, partly driving that,” he said.
Mr Vale said the biggest perceived risk in terms of sustainability was VAT, with consumer concerns around Brexit in particular expected to see spending and resultant VAT receipts come under pressure.
The Department of Finance is forecasting economic growth of 3.5 per cent this year, down from an estimated 4.2 per cent in2016.