Friday 23 August 2019

Strong economy lifts tax income as Government racks up surplus

Doubling up: Paschal Donohoe will have two budget options. Photo: Gareth Chaney, Collins
Doubling up: Paschal Donohoe will have two budget options. Photo: Gareth Chaney, Collins

David Chance

Record numbers of people in work and rising wages boosted tax receipts and helped the Exchequer to a €260m surplus for the first six months of this year.

It marks a more than €1bn turnaround from last year's deficit at this stage.

Income tax revenues hit €10.49bn in the first six months of the year, €749m ahead of June 2018, the Department of Finance said.

Meanwhile, company tax receipts came in at €4.16bn, marking a return to trend after weak numbers in May.

"As June receipts primarily reflect corporate profits in 2019, today's positive numbers augur well for the year as a whole," said Peter Vale, a tax partner at Grant Thornton Ireland.

The Government is expecting company tax revenues to come in at €9.48bn this year, less than the €10.4bn recorded in 2018, when a surge in receipts helped the budget to a surplus and covered €600m of overspending on health.

The revenue side was also boosted by income from the Central Bank of Ireland and carbon tax auction proceeds that came in at €2.79bn, or €322m more than in the first half of 2018.

At the same time as the rise in tax, the figures also showed that the spending side of the budget was largely on track.

Health, which accounts for 28pc of voted spending, came in broadly on target in the first half of the year at €8.15bn compared with a 2.3pc budget overshoot in the same period a year ago, although it was up 8.1pc from a year ago.

The numbers appeared to indicate that Finance Minister Paschal Donohoe is on track to record a second successive budget surplus this year, although much will depend on the performance of corporate tax receipts, which have been hard to predict in recent years.

There is also the risk of cost overruns emerging later in the year, particularly on health spending where they have averaged €500m more than budgeted between 2015 and 2018, and Davy Stockbrokers said it was more likely than not that there would be another overshoot.

Brexit is also looming, with the UK set to leave the European Union on October 31 in a move which could hit food and agriculture exports hard and push the budget into deficit.

The Department of Finance is forecasting that the economy should grow 3.9pc this year, although it has warned that a hard Brexit could reduce growth to close to zero.

Mr Donohoe will be writing two speeches for the October Budget due to the uncertainty over Brexit.

He hailed yesterday's numbers as showing "a solid performance underpinned by a strong economy" which meant the Government would be able to hit its budget target for this year.

Irish Independent

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