Probe as income tax haul falls short

The Department of Finance is investigating the reasons for an unexpected drop in revenues it collects from income tax revenues as it issued its exchequer returns for taxes and spending in March.

The revenue drop is puzzling because PAYE, a major part of the overall income tax haul, increased from last year and has so far performed to expectations.

A smaller element of the tax, USC, has contributed around €60m less than anticipated for the first three months of 2017.

Income tax — one of the ‘big four’ tax sources — brought in over €1.29bn in March, some €57m less than was anticipated in planning for the 2017 budget. At over €4.41bn for the first three months, income tax receipts also fell short of their target, by €180m.

Officials are investigating the reasons behind the shortfall because USC should, like the PAYE element, record increases in line with the sharp rises in employment.

CSO figures, also published yesterday, showed that unemployment in March fell to 6.4% from 6.6% in February. The jobless rate is now down sharply from the 8.3% a year ago.

At over €3.98bn, the exchequer’s overall tax revenues were short of their budget target by €326m in March, and at €11.49bn, were short of target by €282m over the first three months of the year.

Conall Mac Coille, the chief economist at Davy Stockbrokers, said it was too early in the year to sound concerns about the performance of the exchequer’s finances.

The Government brought in €1.75bn in Vat receipts in March, which was €61m short of target.

Total Vat receipts of almost €4.57bn are, however, running €151m ahead of target since the start of the year.

A sharp drop in new car sales this year had not affected revenues and had been offset by a sharp rise in sales of second-hand cars, said officials.

At over €466m, excise duties were also below target — bringing in €27m less than anticipated in the month — and, at almost €1.28bn, brought in €91m less than anticipated over the first three months.

Officials said the delayed introduction of plain packaging for cigarettes had contributed to distortions.

The exchequer collected €520m in corporation tax receipts in the first three months, some €177m less than anticipated. Officials stressed that a large part of overall corporation tax revenues are collected later in the year.

Finance Minister Michael Noonan said the Government “will ensure that taxes can be set at an appropriate level and vital public services can be paid for”.