Corporation taxes have again delivered an unexpected bounty after a new international accounting treatment for companies helped bring in almost €280m more in revenues in May than the exchequer had been counting on.
Corporation revenues in the month amounted to over €1.46bn, meaning that the tax source brought in €267m, or 22% more than was anticipated in the single month.
The out-performance meant exchequer revenues from all tax sources was €279m, or over 5% ahead of budget expectations.
The Department of Finance said that the boost to corporation tax revenues, however, would occur for one month only and was because the adoption of the so-called IFRS 15 accounting standard changed the way companies recognised their revenues.
The accounting treatment would not be repeated and would not affect corporation revenues through the rest of the year, a spokesman said.
In the early years of the economic recovery, corporation tax revenues repeatedly overshot targets by huge margins.
That was because Ireland controversially benefited more than most from multinationals rearranging their global tax affairs as technology giants transferred huge amounts of intellectual property rights into the country, amid an international outcry over tax avoidance schemes.
The out-performance of corporation tax revenues moderated last year, but corporation taxes had by then grown to account for a significant part of the overall revenues the Government raises from all its tax sources. Despite official figures showing an increase in retail sales, Vat again under-performed in May, in a so-called Vat payment month. Vat brought in over €2bn, or €74m less than expected in the month.
And over the first five months of the year, Vat has brought in €105m less than expected.
At over €1.55bn, income taxes brought in €55m more than anticipated in May, and are almost into line with the department’s budget for the five months.
Excise duties again fell short of expectations in the month, bringing the shortfall to €68m over the first five months of the year.
Conall MacCoille, chief economist at Davy said that the May figures had been “muddied” by the corporation tax accounting boost.
However, having been artificially depressed by the bad weather in the early months, Vat revenues would likely catch up with budget targets as the year progressed, Mr MacCoille said.
However, the Government should keep its sights on funding its proposed spending on infrastructure, said Chambers Ireland.