VAT and corporation tax receipts help Exchequer to near-€900m surplus
Latest returns show increases in all of State's revenue sources, but income tax receipts still behind expectations
An €896 million surplus at the end of July compared to a deficit of €277 million a year earlier. Photograph: iStock
Increased revenues from taxes on consumer spending and companies’ profits contributed to a near-€900 million Government surplus for the seven months to the end of July, according to official figures.
Exchequer returns published on Friday show that the State collected €36.009 billion in taxes and other revenue in the first seven months of the year and spent €35.113 billion.
That left the State with an €896 million surplus for the period, a turnaround from the €277 million deficit it had at the end of July 2018.
The Department of Finance said that increases in all the State’s sources of revenue drove the €1.173 billion improvement on this time last year.
Consumers paid almost €9.75 billion in VAT during the first seven months of the year, €561 million or 6.1 per cent more than in the course of the same period in 2018.
July is a due month for the payment of the sales tax, seen as a measure of the consumer economy’s health, and receipts from this source were €125 million ahead of what the Government expected for the month.
Corporation tax, which companies pay on their profits, hit €4.61 billion by the end of July, €428 million more than during the first seven months of 2018, and €210 million ahead of target.
The department said that companies paid €437 million in July alone, a performance that officials described as “strong”.
Workers paid €1.727 billion in income tax on their wages last month, bringing the total for the year to date to €12.22 billion, which was €773 million or 6.7 per cent more than during the same period in 2018.
However, the returns state that the sum collected in July was €142 million behind what the Government hoped while the year-to-date total undershot its target by €188 million.
Department officials believe that this is a “timing issue” as income tax totals have exceeded expectations in other months and say that it should reach its €23 billion target for the year.
Peter Vale, tax partner with accountants Grant Thornton Ireland, said strong VAT returns showed that Brexit fears have not cooled spending, which could have been more robust were it not for uncertainty over the UK’s EU departure.
“However, it’s difficult to see VAT returns not be adversely impacted over the next few months, regardless of the Brexit outcome,” he said.
“This could leave a gap in the year-end exchequer figures, unless that gap can be bridged by surpluses elsewhere.”
Mr Vale suggested that corporation tax was most likely to generate a surplus big enough to plug holes elsewhere.
“November is the critical month for corporate tax, with the June and July figures giving some hope of strong returns later in the year,” he added.
Spending on the health service grew around 7 per cent to €8.99 billion while education cost around 6 per cent more at €5.6 billion, in the year to date. Social welfare spending dipped to €6.22 billion from €6.28 billion.
Ian Talbot, chief executive of of business body Chambers Ireland, acknowledged that the figures reflected a strong economy but called for prudence in light of Brexit.
“We know businesses are starting to postpone investments because of Brexit, and it is likely this will only continue to be the case between now and October,” he said.