Tax take up €644m but VAT a cause for 'concern'
The tax take for the year so far is €644m ahead of expectations, but VAT - a key gauge of consumer spending - is coming in below target.
VAT receipts so far this year are €292m below projections. For July alone, they're €61m lower than targeted. Overall in July, the tax take is €98m lower than expected, with VAT receipts partly to blame.
But analysts have argued Brexit isn't to blame for the lower than expected returns, as July's receipts largely reflect spending in previous months. And compared with the same time last year, VAT receipts are 6.1pc stronger reflecting the improved consumer spending over the period.
Nonetheless, the under performance will be keenly watched by the Government as Budget preparations ramp up in September.
So far this year, the State has collected €26.6bn in tax - €644m above target.
Income tax, at €10.29bn, is €1m below target. VAT receipts total €7.99bn, €292m lower than thought, while corporation tax receipts are €482m ahead of target.
Peter Vale, tax partner with Grant Thornton, said the Exchequer Returns will reassure the Government over the level of fiscal space in the Budget.
"Although VAT remains a nagging concern," he said.
"Brexit itself came too early to have any real impact on the figures; it will be early October before we see whether there has been any change in consumer spending behaviour.
"Slightly worryingly, the figures show VAT receipts continuing to lag behind target. If this trend accelerates post Brexit, we could see the VAT figures falling further. A resultant drop in VAT receipts could impact on the scope for tax cuts or spending increases in the Budget."
Conall Mac Coille, economist with Davy Stockbrokers, said the figures are a "mixed bag".
"July's receipts largely reflect spending in previous months, so the weakness cannot be attributed to any Brexit effect," Mr Mac Coille said. "On balance, the weakness in the month probably reflects volatility and the unwinding of some of the strength in corporation taxes earlier in the year.
"Overall in the year to July, tax revenues and PSRI receipts are still €663m ahead of the Budget target."
The Exchequer recorded a surplus at the end of last month, as compared to a deficit of €648m in the previous year. The €1.51bn year-on-year improvement in the Exchequer balance is driven primarily by a year-on-year increase in tax revenue.
Spending discipline is being maintained. A €200m overshoot in the Department of Health has been offset elsewhere.
"While the figures are somewhat distorted by one-off items, the underlying story is one of impressive growth in tax receipts and flat spending, which is contributing to a marked strengthening of the public finances," said Philip O'Sullivan, economist with Investec.