By Eamon Quinn
The chances of an election this year have “increased significantly”, a leading analyst has said, after new exchequer figures showed tax revenues from income tax and Vat sales over Christmas had flowed into the exchequer.
“If the Government wants to have an election, it is certainly a good time to have one as now all the economic numbers show the economy becoming hotter,” said Alan McQuaid, chief economist at Merrion Capital. The first exchequer figures of the year showed overall tax revenues had climbed to just over €5bn in January, an increase of almost 5% from January 2017.
The puzzling underperformance of income tax revenues for much of last year was transformed in the first month of 2018 into the most “robust” growth performer, to bring in €1.75bn, or 6.6% more than in January 2017, the Department of Finance said.
The income tax performance will likely ease the jitters of some officials who had worried over the strange under-performance of the tax source in early 2017, at a time when receipts ought to have been booming as the number of jobs increased amid the economic recovery.
Vat brings in more revenue in January than any single month because it accounts for the key Christmas spending months of November and December. It again performed this year — with revenues from the tax source rising 5.7% from a year earlier, to over €2.44bn in the month.
The Vat figures will likely ease some observers’ fears that the slump in the value of sterling against the euro following Britain’s vote to leave the EU would drive consumers to cross-border shopping and online for their Christmas purchases.
The Department of Finance last year repeatedly said there was no evidence the surge in the euro had led to any significant rise in cross-border shopping. The department described the growth in January’s Vat receipts as “strong”. But one Brexit-related effect showed up in motor tax revenues, which raised €87m in January, down by €9m from a year earlier.
At €478m, the third richest source of tax revenues in the month, excise duties, were up in January by “a marginal” 2.3%, the department said.
With the bulk of corporation tax receipts collected in the later months of the year, January’s take from the profits’ tax told little at this early stage about their likely performance. Corporation tax receipts last year soared as the exchequer tapped the huge rise in profits reported by the multinationals based in Ireland, including Apple and Microsoft.
Last month, Finance Department officials said there were “some concentration issues” with corporation tax because 40% — equivalent to around €3.28bn of the €8.2bn the exchequer took in from the tax last year — was paid by only 10 companies.
The international tax affairs of multinationals have again been thrust into the unwelcome international spotlight, with European governments and US president Donald Trump questioning Ireland’s tax regime.
The explosion in Ireland’s corporation tax receipts from 2015 has coincided with moves by multinationals to shore up their global tax arrangements, involving transfers of huge amounts of intellectual property rights into their Irish-based firms.
At a panel in Davos last month, Finance Minister Paschal Donohoe faced a barrage of criticism over the State’s tax set-up.