Economist 'puzzled' by rise in corporation tax receipts
A surge in corporation tax receipts that made up around 70pc of the tax over-run for the first nine months of the year has been described as a "puzzle" by the Department of Finance's chief economist.
Exchequer Returns for September showed the tax take in the year to date was €1.7bn better than expected, with corporation tax receipts alone a massive €1.2bn over profile, or 44pc.
The Department of Finance has said the Revenue Commissioners attributed the over performance in corporation tax to improved trading, currency effects and the fact that there are more companies paying tax.
But John McCarthy, the department's top economist, said the reason simply isn't known.
"It's somewhat of a puzzle, I have to admit," he told TD's at the Oireachtas Finance Committee.
Mr McCarthy said it was very difficult to get a handle on the very strong rates of increase.
Meanwhile, the Department of Finance now expects the unemployment rate to drop below 8pc a year earlier than it predicted in April.
In its economic forecasts underpinning a Budget of €1.2bn, the department believes the jobless rate will drop to 7.7pc in 2017.
In April's spring economic statement, the department didn't see unemployment dropping below 8pc until 2018.
As well as dramatically upgrading its growth forecasts for this year to 6.2pc, the department also believes that domestic demand will make a much larger contribution to growth.
The Department is forecasting domestic demand growing at 4.3pc this year, and 4.1pc next year. Net exports will rise 2pc this year, before falling back to 0.3pc in 2016.
Inflation this year is projected to be 0.1pc, rising to 1.1pc next year.
Mr McCarthy said he would prefer to see inflation running at a higher rate.
It comes as the International Monetary Fund (IMF) cut its global growth forecasts for the second time this year, predicting a weaker-than-expected recovery this year and next year.
But the Washington-based body upgraded Ireland's growth rate to 4.8pc for this year, which is much more conservative than the 6.2pc forecast by the Department of Finance.
However, that's an improvement on the 4pc forecast the global body made when it published its most recent assessment of the Irish economy in June.