Buoyant exchequer avoids Brexit hit but spending rises strongly

The huge uncertainty facing Irish businesses and households over the direction of Brexit has yet to significantly affect Government revenues, the latest exchequer figures show.

In March, three of the big tax sources — Vat and income and excise revenues — performed well, while corporation receipts exceeded expectations even as political and business warnings over a hard or no-deal Brexit increased.

The figures were more mixed over the full three months as income tax revenue underperformed but Vat receipts were on target and excise taxes brought in slightly more than anticipated.

Corporation tax revenues continued to outstrip expectations for the first three months.

In March alone, the tax source brought in €72m more than anticipated and a cumulative €267m more for the three-month period.

Last year, corporation tax receipts were the star performer, bringing in €10.4bn, €2.2bn more than 2017, and accounting for a record 19% of the revenue the State collects from taxes.

That sparked warnings from the fiscal watchdog and other economists about the Government funding day-to-day spending increases from a potentially unsustainable tax source.

A spokesman for the department said repayments of corporation taxes were due later in the year and it was too early to predict whether corporation taxes would again outperform in 2019.

It was “very happy” with tax revenues of almost €4.69bn raised in March and the €12.79bn in revenues collected over the first three months, he said.

Finance Minister Paschal Donohoe said:

All tax heads are performing well, reflecting the economy which is growing on a broad and sustainable basis.

On income tax revenues, the department said repayments made in February linked to delayed repayments for 2018 continued to weigh on income tax revenues over the first quarter.

At €1.5bn in March, income tax revenues matched targets, but at €4.97bn for the full three months were €171m below target.

In a Vat-paying month, the exchequer beat its own target by taking in almost €2.1bn from the spending tax.

Receipts of over €4.98bn for the three-month period brought income taxes back on target.

On spending, the figures show that a large annual increase in expenditure is almost exactly matched by the increase in tax revenues.

Total net voted expenditure of almost €12bn over the first three months was up 7.2% from a year earlier.

Broker Davy said spending was “the bigger picture” as the Government spent tax revenues instead of boosting its budget surplus.

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