''Surprise'' fall in Vat revenues as Government spending grows

Corporate tax revenues were the star performer in the first month of the year, but Vat receipts fell back and Government spending rose sharply, the monthly exchequer figures showed.

''Surprise'' fall in Vat revenues as Government spending grows

Corporate tax revenues were the star performer in the first month of the year, but Vat receipts fell back and Government spending rose sharply, the monthly exchequer figures showed.

The exchequer took in a total of €5.9bn from all tax sources in January, an increase of 10% from January 2019.

However, corporate revenues jumped by over 213%, to bring in €116m, but the comparison is with the negative revenues the exchequer took in from corporations in January 2019 when the exchequer paid back companies for overpayments.

The Irish Fiscal Advisory Council, the Economic and Social Research Institute, and independent economists have long warned the Government against relying on corporate tax revenues to fuel spending programmes.

Most of the other ‘big four’ tax sources grew sharply, but Vat revenues fell by 1% in the year to €2.7bn.

At almost €2.2bn, income tax revenues increased 16.7% and excise duties rose 10.4% to €512m.

The Department of Finance figures also showed that net spending topped €4.5bn in the month, up 8.5% from a year earlier, including a 6.6% rise in current spending.

Austin Hughes, KBC chief economist said the exchequer tapped a rising economy in the month but spending increased at a faster than expected rate too.

“However, Vat returns in a Vat payments month were surprisingly weak,” said Mr Hughes.

“January is the second most important month for tax receipts and the biggest month of the year for Vat,” said Peter Vale, tax partner at Grant Thornton Ireland.

“Vat receipts in January reflect trading activity over the Christmas period.

“Perhaps surprisingly, the figures for the month were 1% below the 2019 comparative. It looks like lingering Brexit uncertainty fed into consumer confidence over the Christmas period and depressed spending,” said Mr Vale.

There was an exchequer surplus of €1.6bn in January, little changed from a year earlier, the figures show.

Among other tax sources, excise tax revenues rose 10.4% in the year to €512m, but capital gains tax revenues brought in €68m, down from €73m collected in January 2019.

Motor tax revenues brought in €91m in the month, down from €95m a year earlier.

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