State coffers boosted by €1.1bn tax windfall

The country’s improving economic fortunes are reflected in the latest exchequer returns released yesterday which show tax revenues to the end of November running more than €1.1bn ahead of target.

Total tax revenue of €38.1bn was collected to the end of last month, an increase of 3% on projections and €2.9bn, or 8.5%, ahead of the same period last year.

The exchequer deficit of €5.8bn represents an improvement of €1.8bn on projections.

With the labour market showing continued signs of improvement, the State’s coffers have been boosted by a bigger income tax take which came in €122m ahead of estimates, with receipts for November alone providing a €70m boon.

Typically, November is the most important month for exchequer figures with corporation tax receipts and those from self-employed workers often paid during the month, as Grant Thornton tax partner, Peter Vale explained.

“November is a critical month for tax receipts as a significant proportion of total income tax and corporation tax receipts for the year is paid in this month. Today’s figures again reflect the general sense of optimism in the economy with tax receipts ahead of target and significantly ahead of last year. Income tax and corporation tax in particular are performing strongly,” said Mr Vale.

Corporation tax receipts for the year to date of €4.18bn are up €240m (6%) year-on-year and €209m ahead of target. Receipts for November were somewhat lower, down €15m on projections.

Vat receipts were also slightly below profile by €31m, but remain more than €310m ahead of forecast for the year, and €575m ahead of last year’s take.

Mr Vale says that years of austerity measures are continuing to be seen in the somewhat muted increase in spending this year.

“We have seen some mixed news recently from retailers in terms of consumer spending. The figures for Vat, which reflect activity in September and November, indicate a cautious return to spending. It is sometimes easy to forget that while last October’s budget brought some respite for taxpayers, we are still living with the cumulative impact of six years of successive austerity budgets,” said Mr Vale.

Excise duty at €4.5bn to the end of November was €245m ahead of projections while stamp duty, driven by a pick up in the property market, was almost 30% ahead of last year’s 11-month total and 16% ahead of profile.

The contentious Local Property Tax (LPT) contributed €449m to State coffers to the end of November, despite running 5.5% behind target.

Meanwhile, the continued struggle within the Department of Health to meet budget targets is also illustrated in the exchequer figures, with Leo Varadkar’s department running €533m, or 5%, ahead of budget.

Similarly, the Department of Transport, Tourism and Sport has a budget overrun of €41m, or 4%, to the end of November. These overruns are offset by under-spending across most departments.

Total exchequer debt servicing costs at the end of November totalled €7.8bn — an increase of €263m. Interest expenditure — the largest component of debt servicing — was almost 6% below budget estimates, largely as a result of the government’s December 2013 bond buyback which reduced interest expenditure in 2014.