Tax revenue undershoots Government target again
Exchequer numbers show gap between actual and targeted receipts narrowing
Minister for Finance Michael Noonan. The Department of Finance has been at a loss to explain the weaker-than-expected trend in income tax which is at odds with the growth in employment. Photograph: Alan Betson
The Government’s tax take for the year to date was 1.4 per cent or €268 million behind target in May, according to the latest exchequer returns.
However, the gap between actual and targeted receipts, which has been highlighted as a concern, narrowed for the first time this year as income tax and corporation tax performed better than in previous months.
The Government has collected €19.4 billion in tax for the first five months of 2017, slightly below the Department of Finance’s projected total of €19.6 billion, but up nearly 3 per cent or €550 million on last year.
Income tax, the State’s largest tax stream, was 2.6 per cent below profile at €7.6 billion. The department has been at a loss to explain the weaker-than-expected trend in income tax which is at odds with the current growth in employment.
However, it will be relieved that income tax receipts for May, which totalled €1.4 billion, were broadly in line with expectations in contrast to previous months.
Corporation tax has also underperformed the department’s target this year, coming in 10 per cent below expectations at €1.7 billion. However, business tax receipts for the month of May were ahead of projections at just over €1 billion for the first time this year.
The figures showed nearly €6.6 billion has been collected in VAT so far this year, which was nearly 4 per cent or €254 million above profile.
Better-than-expected receipts for the sales tax are indicative of a pick-up in retail, which has been slower to recover from the crash than other sectors.
The other main tax head, excise duty, was 4 per cent below target at €2.2 billion, but this was again linked to the front-loading of receipts on tobacco products ahead of plain-packaging rules.
The latest figures resulted in an exchequer surplus of €383 million compared with a deficit of €125 million for the same period last year, with the improvement attributed to increased tax revenue.
On the spending side, total expenditure was just over €17.8 billion, which was 1.5 per cent inside target.
The figures show spending on health was just over €5 billion, which was marginally inside its targeted budget for the year, while social protection spending was €8 billion, also inside budget.
Grant Thornton tax partner Peter Vale described the latest returns as a mixed bag, noting that while VAT receipts were still strong income tax continued to lag behind target despite the very robust employment data.
“It is difficult to reconcile the figures, with a possible explanation being more part-time roles with lower pay, resulting in more people in work but less net disposable income.
“ However there simply isn’t enough data in the figures released today to draw any firm conclusions on what is underpinning the figures,” Mr Vale said.
“May is a relatively significant month for corporation tax, and the figures for the month show a welcome improvement. The 2017 returns are now back in line with the 2016 comparables, although still lagging well behind forecast.”