Disappointment over tax revenues

The Department of Finance has expressed disappointment at the continuing underperformance of tax revenues, but will be looking to May’s figures — traditionally a big revenue month on all tax fronts — as a better indicator for the full year.

Latest exchequer returns show that the Government took in just over €2.61bn in tax revenue in April, 2.3% below target as both income tax and corporation tax again underperformed. April’s disappointing figures mean the combined tax take for the first four months of this year — €14.1bn — is 2.4%, or €344m, behind target.

A department spokesman said the current month’s figures would be “very important” in terms of assessing tax projections for the rest of the year.

Income tax performance has puzzled many economists since the start of the year, with the level of returns seemingly at odds with steadily rising employment figures. In April, income tax receipts, at €1.76bn, again undershot monthly targets, this time by 1%.

While income tax revenues are up by over 1% — or €75m — on an annual basis, in the first four months of the year they are 3.1%, or nearly €200m, below target.

“It’s difficult to rationalise why income tax receipts aren’t stronger, with modest tax cuts in 2017 unlikely to explain the difference,” said Grant Thornton Ireland tax partner Peter Vale.

“Overall, the tax performance is a little disappointing, but the annual payment of surplus income from the Central Bank to the exchequer in May is set to be ahead of target, offsetting some of the tax shortfall in the year-to-date,” said David McNamara of Davy Stockbrokers.

Corporation tax receipts amounted to €67m in April, over 41% below target.

For the first four months of the year the corporate tax take was down by €172m on the same period in 2016. They were also €223m below target.

While the key months for corporate tax receipts are later in the year, the early returns “remain a cause for concern”, according to Mr Vale, “with no obvious explanation for the shortfall”.

With regard to the other two of the so-called big four taxes, excise duties finished last month 5.4% below target, but Vat continued to perform strongly.

Despite April being a non-Vat due month, at €200m Vat receipts were €106m above expectations.

In the year-to-date, Vat receipts were 5.7% ahead of target.

In its annual report, the Central Bank said it transferred €1.8bn of the €2.3bn in profits it earned last year to the exchequer.