Wednesday 23 October 2019

Tax take leads €1.2bn budget turnaround

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David Chance

The State recorded a €1.2bn turnaround in its finances from last year - despite a big rise in spending - thanks to increases in tax revenues.

It likely puts it on track to beat its budget forecasts this year, even though the economy is coming off its peak.

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Despite more spending on health and infrastructure, which saw voted expenditure rise by 6.8pc to €33.74bn, gains from income and company taxes more than plugged the gap and the Exchequer recorded a deficit of €625m in the year to August, compared with €1.82bn a year earlier.

Total tax revenues for the year to the end of August rose by 8.1pc to €35.05bn with income tax contributing €14.1bn and company taxes €4.93bn, €314m ahead of target and €563m better than last year, the Department of Finance said yesterday.

Peter Vale, tax partner at Grant Thornton Ireland, said the figures "would indicate that there will be another corporate tax surplus at year end".

Stellar growth in the post-crisis recovery period has healed the holes in the budget, although growth is set to slow from the 8.2pc in 2018.

A survey of business activity by AIB showed that while the numbers remained positive in August and Ireland was still outperforming its peers, the rate of increase dropped off.

AIB's Ireland Services Purchasing Managers Index dipped to 54.6 from 55 in July and recorded its slowest rise since the start of the year.

"It points to a slower pace of activity in the Irish economy in 2019," Oliver Mangan, AIB's chief economist said, although he noted the reading was well above the 53.4 in the eurozone, where a manufacturing slump is now threatening to bleed into the services sector.

Purchasing manager surveys often give an early signal about the outlook ahead of official data, although recently actual economic performance and so-called "survey data" have diverged. A reading over 50 indicates an expansion from the prior month.

The AIB survey showed growth in new orders eased in August "with some firms reporting a drop in UK orders owing to Brexit uncertainty".

"Furthermore, business confidence fell sharply to its lowest level since December 2011 as Brexit weighed on the outlook for activity in the sector," Mr Mangan said.

Employment in the services sector continued to expand in August but the pace was the slowest since May 2013.

Irish Independent

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