Business Irish

Saturday 21 July 2018

Higher than expected corporation taxes boost State coffers

Department of Finance official John Palmer. Photo: Collins
Department of Finance official John Palmer. Photo: Collins

Donal O'Donovan and Peter Flanagan

Corporation tax continues to pour into the State's coffers at higher rates than expected, but other taxes have dipped since the start of the year.

However, while overall spending is running on target, the Department of Health is already over budget for the year, according to the figures.

The total amount of taxes collected by the State in the first three months of the year was €11.1bn. That is 1.1pc ahead of profile - the forecasts built into Budget 2016. It is up 6.4pc compared with the taxes collected in the same period last year.

Investec's Philip O'Sullivan said the figures were encouraging, but warned of growing risks to the economy here, at home and abroad.

Receipts from corporation tax were €654m in the period, a hefty €99m (17.9pc) more than a year ago and €305m (87.3pc) above profile, according to official Exchequer Returns published yesterday.

That is understood to be in part because of an early payment of taxes by one big corporation, and therefore a one-off.

According to Department of Finance official John Palmer, a significant amount of that came from "one-off payments from companies" and were not tied to any trend in the wider economy.

Mr Palmer told reporters that while the Revenue does not provide details on tax payments, tax officials had indicated that a large proportion of the payments came from several different companies.

"The problem with one-off payments is they tend to relate to company-specific issues, so it is impossible to predict whether these payments will continue at this level," Mr Palmer said.

With just 10 big companies paying half of all corporation tax, any change by the biggest taxpayers can distort figures.

Government spending fell in the period, though only marginally.

Excise duty was also up, boosted by strong car sales.

Davy's Conal MacCoille said timing effects had distorted some of the returns, but not fundamentally.

In addition to the early corporation tax payment, those timing issues included VAT receipts coming in below expectations, despite January and February's exceptionally strong retail sales data, apparently due to a delayed payment made in early April and repayments made in February.

Aside from that, the latest figures contained few surprises, but were welcomed by analysts.

"The Exchequer Returns show a creditable performance from the public finances in the opening quarter of the year, both in terms of tax revenues and expenditure," Mr O'Sullivan said.

On the flip side, income tax was up by a relatively small 2.7pc in the period. That's better than last year, thanks to the numbers back at work, but 3.4pc below this year's target.

VAT also came in shy of its target, at €3.9bn.

On the spending side, discipline is holding up across the public sector on the whole.

Spending was a negligible 0.1pc off target over the three months. Worryingly for the longer term, capital expenditure was €28m under target, however, while current expenditure ran ahead.

The Department of Health continues to be the sick man in that regard. Unlike other high-spending departments, where costs are being kept in check, Health Minister Leo Varadkar's department is €37m over-budget already this year.

Irish Independent

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