Weaker income tax receipts push Government finances off target

Department insists underlying trend remains positive, while VAT take also swells

Minister for Finance Paschal Donohoe: Weaker-than-expected income tax receipts in the first quarter. Photograph: Dara Mac Dónaill / The Irish Times

Minister for Finance Paschal Donohoe: Weaker-than-expected income tax receipts in the first quarter. Photograph: Dara Mac Dónaill / The Irish Times


Government tax revenues were marginally below target for the first quarter of 2018 because of softer-than-expected income tax receipts. However, the trend, while inconsistent with the strong labour market, is expected to unwind before the end of the year.

The latest exchequer returns, published by the Department of Finance, show the Government collected €11.9 billion in taxes during the first three months of the year.

While this was 3 per cent or €400 million up on the same period last year, it was marginally – €141 million or 1.2 per cent – below what the department had targetted.

The shortfall was blamed on a dip in returns from the self-employed sector, which saw income tax come in €80 million below profile at €4.6 billion. The department said that with the bulk of receipts from self-employed people coming later in the year, it did not expect this shortfall to persist.

It also noted that income tax, including the universal social charge (USC), as a whole was up nearly 6 per cent in year-on-year terms, reflecting the continued growth in employment.

The other main tax stream, VAT, came in 2.4 per cent above profile at €4.6 billion, which tallies with recent positive retail sales data.

Corporation tax, which has generated record returns for the Government in recent years, generated €532 million, which was 2.3 per cent below target, albeit most of the annual total from the business tax is not expected until later in the year.

Weather impact The other main tax

, excise duty, came in at €1.2 billion, which was €44 million off target. The department suggested reduced sales of motor oil during the recent bout of bad weather may be to blame.

The biggest surprise was a 12 per cent or €40 million weakness in stamp duty returns, which raised concern about whether the higher 6 per cent rate of commercial stamp duty would yield the extra €375 million envisaged in Minister for Finance Paschal Donohoe’s recent budget.

Overall, the figures pointed to an exchequer deficit of €1.1 billion for March, compared to a deficit of €903 million at the same stage last year.

The €211 million year-on-year decrease in the exchequer balance was primarily due to an increase in expenditure, which was somewhat offset by increased tax revenue, the department said.

Non-voted expenditure of nearly €3 billion was up year-on-year by 10.6 per cent with the annual increase driven by a higher EU budget contribution. This was due to Ireland’s increased share of EU budget obligations and the timing associated with the funds called up by the commission, the department said.

“These first quarter figures represent a good start to the year and provide a platform to help achieve our annual targets,” Mr Donohoe said.

“However, potential challenges, including Brexit, exist, making it even more important that the Government continues its careful stewardship of the public finances,” he said.

“We will continue to focus on prudent management of the economy and on implementing competitiveness-oriented policies to ensure we remain resilient in the years ahead,” Mr Donohoe said.

The department’s principal officer John Palmer said it was probably too early to determine if disruption from the unseasonally cold weather in recent weeks had reduced tax revenues.