Fears as tax return for July is short by €89m - may be first indicator of Brexit impact
Government revenue will now come under extreme scrutiny in the months ahead of October’s budget as Vat receipts came in lower than expected. Exchequer figures released by the Department of Finance were lower than forecast, with Vat, excise and corporation tax all under target.
Although exchequer returns are still ahead of target for the first seven months of the year, the amount collected in Vat during July — the first month after Britain’s vote to leave the EU — was €61m less than anticipated.
Reacting to the figures released yesterday, economist Jim Power said: “There is no doubt that we are seeing some Brexit impact. It is still modest but it has instilled a level of uncertainty into the Irish economy that we haven’t seen for some time. The exchequer returns do reflect some Brexit impact.
“It is clear that Brexit has had some impact on confidence. I would expect the next consumer confidence reading which should be published in the next few weeks will be interesting and will be one to watch.”
Almost €4.09bn in taxes was taken in last month but this was 2.3% lower than the amount laid out in Budget 2016. Revenue generated from corporation tax was €23m (16.5%) less than expected in July while excise was €25m (5%) less.
However, in the year to date, tax receipts are up 8.5% and the Government still has €644m more than anticipated.
Mr Power described the July outcome as disappointing and said this may have been a knee-jerk reaction in the immediate aftermath of the UK’s decision to leave the EU but the returns in the coming months would have to be monitored closely to see if a trend develops.
“The immediate impact of Brexit on Ireland has been seen in the currency, but the other effect that is more difficult to capture is the uncertainty and the fear factor it creates,” said Mr Power.
University of Limerick economist Stephen Kinsella said the figures could be an indicator of the impact of Brexit but added that longer term returns would have to be considered.
“It may be that people decided not to invest more but it’s hard to tell. Month on month, there is an astounding level of volatility,” he said.
Dr Kinsella said that the true economic impact Brexit will have on this country will only be realised when the deal is negotiated between Britain and the EU.
Meanwhile, Foreign Affairs Minister Charlie Flanagan has suggested alternative ways to monitor trade crossing the border may be examined when Brexit negotiations get underway.
He effectively said that previous proposals from other ministers for a so-called all-island Brexit forum were now essentially dead in the water.
Brexit would remain a huge challenge for the coming years, he said. He said he had spoken to every one of his 27 foreign affairs ministerial colleagues in Europe about the Brexit implications.
“I am anxious to ensure that the unique position of Ireland is not only acknowledged but appreciated by my foreign affairs colleagues,” he said.
He said he was encouraged by their understanding about “the unique relationship” between Dublin, London and Belfast and said any possible reintroduction of a ‘hard’ border between the North and South would be “inoperable”.
Mr Flanagan said 30,000 people a day now crossed it, with some going to schools and colleges, and said alternative means of checking trade could be examined.
“In the event that, for example for trade purposes, there may wish to be a need for a form of checking that could be done by other means,” he said.
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