Wednesday 18 July 2018

Tax take on target but little wriggle room for giveaways in Budget

Colm Kelpie

Colm Kelpie

The tax take up to the end of September is virtually on target, at €212m below profile.

The State has collected €35.217bn in the first nine months, compared with a target of €35.43bn.

That's up over €1.8bn year-on-year.

Income tax and VAT are both below profile, although the latter is only fractionally so.

Finance Minister Paschal Donohoe said that with three months left in the year, tax receipts are in line with forecasts.

"This means that we are currently on track to meet our fiscal targets for 2017, providing a stable platform for Budget 2018 and in line with plans to balance the books next year," Mr Donohoe said.

The latest Exchequer Returns show that to the end of the third quarter, the Exchequer recorded a surplus of €2.344bn, a year-on-year improvement of €2.369bn, underpinned by proceeds of the AIB share disposal.

The amount of income tax collected amounted to €13.605bn, down 1.4pc on target. VAT receipts amounted to €11.018bn, down 0.3pc against target.

Corporation tax at €4.67bn was 3.8pc above target.

Excise duties recorded a monthly shortfall of €8 million or 1.7pc. On a cumulative basis, receipts of €4.216bn at the end of September were 2.7pc below target.

The Department said the under-performance is across a range of excise components.

Some €20m was collected in Local Property Tax receipts in September, up €2m on the monthly target. This brings the total for the year-to-date to €362m, which is €12m above target.

The Department said Exchequer debt servicing costs to the end of September were €4.168bn, a year-on-year, a decline of €522m or 11.1pc.

It added that debt service costs in the first nine months of the year were 3.7%pc lower than projected at Budget time, which the Department said reflected the lower than expected cost of this year's bond issuance as well as favourable interest rate and funding conditions.

Peter Vale, tax partner with Grant Thornton, said the figures for September are "reasonably encouraging", with corporation tax in particular continuing to recover from a slow start to the year.

"Corporation tax receipts are now 12pc ahead of the prior year.

"Corporation tax has been the stand out tax in terms of increased revenues in recent years, jumping 50pc in 2015 alone.

"An increase in the transfer of valuable Intellectual Property (IP) to Ireland has been noted as one of the reasons for the upsurge in corporation tax receipts, with a suggestion that the rules around the tax deductibility of IP will be tweaked in the Budget next week, to allow for a smoothening of corporation tax receipts in future years."

Davy Stockbrokers said there was little room for giveaways in the Budget.

"Exchequer returns for September show that the deficit related to the general government was €506m better than expected year-to-date, flattered somewhat by delayed EU payments of €219m," said Davy economist David McNamara.

" Tax revenues of €35.2bn were €202m (-0.6%) below target, albeit still up 5.4% on the year.

"This is broadly in line with expected growth but with no significant outperformance to match trends in recent years, it leaves the government with little room for extra giveaways in Budget 2018 next week."

Irish Independent

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