Revenue growth slows - Exchequer

The pace of growth in Government revenue slowed significantly in April while income tax and Vat receipts continued to fall below expectations, the latest Exchequer figures show. Marc Coleman, Economics Editor, reports.

However, total tax revenues in the first four months of the year remain substantially higher than the same period of 2005, due to strong performance during the first quarter.

Exchequer receipts in the year to April rose to €12.8 billion, up 16 per cent on the same period of 2005 and exceeding budget-time expectations by almost 4 per cent.

But revenues for the month of April were just 3 per cent higher than April 2005, compared with an annual rise of 19 per cent in the year to March, and this implies that the momentum of revenue growth may be slowing.

Income tax and Vat revenues rose in the period by 10.6 and 11.6 per cent year-on-year respectively. But despite their strong growth, income tax and Vat receipts were €36 million and €96 million lower than forecast by the Government at the start of the year.

Vat receipts have significantly outperformed income tax in recent years, replacing them as the largest single source of tax revenues. Compared to €3.6 billion received in income taxes in the year to April, Vat receipts made € 4.4 billion.

Total receipts exceeded expectations by €418 million due to a continued surge in revenues related to the housing market.

Over €1 billion was received in stamp duties in the year to April, exceeding corporation tax receipts for the period. Government expectations were for €863 million to be received in this period. Stamp duty receipts in the same period of 2005 were €722 million.

Capital gains tax also beat expectations, reaching €789 million in the period compared to an expected €615 million and receipts in the same period last year of €486 million.

"April was the weakest month to date with tax revenue marginally underperforming target whereas it overshot significantly in earlier months. April was a shot across the bows of the economic bulls," Ulster Bank chief economist Pat McArdle said.

Mr McArdle added that SSIAs had caused Vat to perform below expectations and said that growth in income tax receipts could weaken in coming months. "There is no sign of advance spending of SSIA monies or if there is, this is not having any obvious impact."

Labour Party finance spokeswoman Joan Burton said the figures proved the Government was becoming too reliant on consumers and house buyers. "The Government is feeding off inflation by having some of the highest Vat rates in Europe." As a consequence, rising petrol prices and construction industry costs are directly fuelling huge increases in VAT receipts", Ms Burton said yesterday.

Fine Gael Deputy Leader and finance spokesman Richard Bruton said that the Government was failing to spend taxpayers money properly."As the Government continues to rake in revenue, the taxpayer is left waiting to see a bang for their buck".