It is too early in the year to reach any definitive view on the state of the public finances. However, the exchequer returns for the first two months of the year provide some reassurance on taxes. Income tax is running close to 6 per cent ahead of last year, reflecting the continued strength of the jobs market. VAT receipts are, adjusting for a technical factor, some 7.5 per cent ahead. It is still too soon to assess trends in the vital area of corporation tax, where the big payment months lie later in the year.
Against a backdrop of international economic uncertainty and evidence that some domestic sectors are under pressure, the figures are impressive. It is important to note that, while among the most up-to-date economic data available, tax returns reflect activity in the recent past, rather than what will happen over the next couple of months.
So while the initial indicators are good, it will be quite some time before the likely trends for the year will emerge. In particular, 2023 showed how swings in corporation tax receipts can affect the figures and here we will not really get a fix until the middle of the year. Initial VAT receipts are encouraging, though the outlook for the tourism season remains uncertain, with the sector under some pressure.
The strength of income tax receipts is the most encouraging element of the figures to date, given the central importance of the jobs market. Recent data has suggested that overall employment growth is slowing, or may have effectively stalled. So far, however, the income tax data suggests significant resilience. This will be important to watch as the year goes on.
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While it is was driven in part by timing factors, the trend in Government spending is also striking. Total gross voted expenditure to the end of February of €15 billion was 22 per cent ahead of the same period last year. Day to day spending is up by 20 per cent. While specific factors relating to public pay and social programmes inflated the February figure, a significant slowdown in spending is going to be needed as the year goes on, if the budget surplus is to come in on target.
<EN>With local elections approaching in the summer and a general election on the horizon, spending control in general is going to be a significant issue. And if the tax receipts keep rolling in, the temptation for the Coalition will be to carry on spending, even if not at the pace seen in the first couple of months of the year.
The two budget ministers, Michael McGrath and Paschal Donohoe, have done a good job keeping the public finances in the black, while putting aside some of the unpredictable corporate tax receipts. Plans to formalise the two new funds for this purpose have yet to be outlined.t is too early in the year to reach any definitive view on the state of the public finances. However, the exchequer returns for the first two months of the year provide some reassurance on taxes. Income tax is running close to 6 per cent ahead of last year, reflecting the continued strength of the jobs market. VAT receipts are, adjusting for a technical factor, some 7.5 per cent ahead. It is still too soon to assess trends in the vital area of corporation tax, where the big payment months lie later in the year.
Against a backdrop of international economic uncertainty and evidence that some domestic sectors are under pressure, the figures are impressive. It is important to note that, while among the most up-to-date economic data available, tax returns reflect activity in the recent past, rather than what will happen over the next couple of months.
So while the initial indicators are good, it will be quite some time before the likely trends for the year will emerge. In particular, 2023 showed how swings in corporation tax receipts can affect the figures and here we will not really get a fix until the middle of the year. Initial VAT receipts are encouraging, though the outlook for the tourism season remains uncertain, with the sector under some pressure.
The strength of income tax receipts is the most encouraging element of the figures to date, given the central importance of the jobs market. Recent data has suggested that overall employment growth is slowing, or may have effectively stalled. So far, however, the income tax data suggests significant resilience. This will be important to watch as the year goes on.
While it is was driven in part by timing factors, the trend in Government spending is also striking. Total gross voted expenditure to the end of February of ¤15 billion was 22 per cent ahead of the same period last year. Day to day spending is up by 20 per cent. While specific factors relating to public pay and social programmes inflated the February figure, a significant slowdown in spending is going to be needed as the year goes on, if the budget surplus is to come in on target.
<EN>With local elections approaching in the summer and a general election on the horizon, spending control in general is going to be a significant issue. And if the tax receipts keep rolling in, the temptation for the Coalition will be to carry on spending, even if not at the pace seen in the first couple of months of the year.
The two budget ministers, Michael McGrath and Paschal Donohoe, have done a good job keeping the public finances in the black, while putting aside some of the unpredictable corporate tax receipts. Plans to formalise the two new funds for this purpose have yet to be outlined. If it wants to keep its reputation for managing the public finances, the Coalition needs to stay the course.