Exchequer reports a discrepancy of €101m in returns

There was a discrepancy of €101m in the reported Exchequer returns for March, as income tax returns were erroneously classified as Vat, said the Department of Finance.

“The overall level of tax collected is unchanged,” it said in a statement. “The department, the Revenue Commissioners and the Central Bank are currently examining the issue and a revised Exchequer statement will issue in due course.”

The Department of Finance has not issued adjusted Exchequer returns for March, because it is checking whether there was a similar mistake made in the February returns. A Finance spokesman said that the January figures are correct.

It is still not clear how the error occurred. All the tax that is collected goes into the accounts of the Revenue Commissioners. The proceeds are then earmarked for the different tax heads before they are transferred to the Central Bank, where the Exchequer returns are calculated.

It is not known at what point during this process that the mix up between Vat and income tax classifications happened.

According to a note issued by Investec chief economist Philip O’Sullivan, the underlying trend is still positive. Income tax is up 6.3% for the first three months of the year, compared with the same period last year, while Vat is up 3.3% over the same timeframe.

The extra €101m of income tax receipts for March more accurately reflects the increase in employment over the course of 2013. A total of 61,000 jobs were created last year.

The Government has pledged to cut income tax in October’s budget. However, the European Commission has urged caution before agreeing to concessions on tax.

The economy needs to grow by 2% this year if the coalition is to meet the 4.8% fiscal deficit target agreed with the troika by the end of this year. It is obliged to bring the budget deficit below 3% by the end of 2015 as part of the EU/IMF bailout programme.

The EU Commission said growth is too uncertain, particularly in view of developments in the pharma sector, to commit to easing up on fiscal consolidation.