Tax trends show VAT now the weak link
The latest Exchequer returns for November show the State is well on track to hit its deficit forecast for the year, but with signs Brexit and sterling may be starting to have an impact.
VAT income in particular was coming in less strongly than expected.
As has been the trend, the latest returns showed strong growth in tax revenues, led by better than expected corporation tax. Total revenues this year were now €777m higher than profile, or expectations. Spending was coming in €784m below profile.
That leaves the Exchequer better off, with an excess of spending over income of €407m compared to €1.7bn last year.
Exchequer Returns to the end of November showed more tax had been paid this year than at the same time in 2015 across all four of the main areas.
As well as corporation tax coming in ahead, income tax ended November 5.9pc, or €978m, higher than at the same time last year.
However, VAT receipts closed November 6.6pc or €128m behind expectations. The Department of Finance said that was mainly accounted for by larger than expected repayments.
VAT receipts were now €413m below profile for the year to date, though in absolute terms up from last year. Excise duties recorded an expected shortfall of €24m in November, but were running just ahead of profile for the year.
"The trend in VAT receipts is a little concerning: these were 6.6pc behind profile in November, the final 'due' month of the year. VAT receipts are now €413m (-3.2pc) behind profile year-to-date, which might reflect the softer retail sales data in recent months," David McNamara of Davy Stockbrokers said.
Meanwhile, the European Commission has said Ireland's economic prospects remain bright, but warned of "clouds" on the horizon. The warning came following the conclusion of the sixth post-programme surveillance mission. The statement by the commission said: "GDP is expected to continue to grow, the future evolution of the activities of multinational enterprises remains uncertain and the external environment has become increasingly unpredictable, especially after the UK 'leave' vote."