Paschal Donohoe has nothing in his way to set “a generous” tax package in a possible pre-election budget in October despite the finance minister receiving a scare over disappointing corporate tax revenues last month, a leading economist has said.
Conall Mac Coille, chief economist at Davy, said there was concern over the amount the exchequer had taken in from taxing company profits in May but that at this stage there was no panic that the normal robust performance of corporation taxes would reassert later in the year.
His comments come after Department of Finance figures showed that at almost €1.34bn, corporation tax unexpectedly took in €390m less than was anticipated last month and the usually buoyant tax source was now running €233m below target for the first five months of the year.
The shortfall meant that at €6.1bn, overall tax revenues brought in €227m less than anticipated in May.
The Government has already said it expected to take in about €1bn less in corporation taxes this year than the record €10.4bn haul it collected in 2018 because of a one-off global tax accounting change that had bolstered the already booming taxes from multinationals.
The three big months for collecting the most from corporation taxes are May, June, and November, but there was “no concern” at this stage because receipts could rebound in June, a Department of Finance spokesman said.
Mr Mac Coille areed with that assessment, saying that income, Vat, and excise tax revenues – the other big three tax sources -- were all strong in the month. “As yet” there was little to worry Minister Donohoe that he will not be able to deliver “a generous” budget before a possible general election, according to the chief economist.
At €2.31bn, Vat revenues brought in €79m more than anticipated in May; the haul from income taxes at €1.76bn was €117m more than anticipated; while excise duties, at €480m, were on target.
May’s figures meant the under-performance of income taxes and Vat earlier in the year has almost been mended, while excise duties were now over-performing their year-to-date target.
Austin Hughes, chief economist at KBC Bank, said Minister Donohoe will have "the scope for stimulus" in his budget, but added that "the issue is how to do it without wasting money or damaging the economy”.
Peter Vale, tax partner at Grant Thornton said: “Overall, May was a mixed bag for the exchequer. Positive returns on the Vat and income tax front need to be balanced against an unexpected dip in corporate tax receipts" and the focus will fall on June's figures.