January tax haul of 7.3% will comfort next government

A bounce of 7.3% in tax receipts in the first month of the year indicates the exchequer’s coffers will continue to fill early this year at least — providing comfort to whichever party or combination of parties form the next administration after the elections.

The Government took in almost €4.5bn in tax in January — before non-tax receipts are taken into account — which was up from the almost €4.19bn tax haul it collected in the same month in 2015.

There are fears, though, that uncertainty about the world economy — reflected in the sharp fall for stock markets amid concerns about China and debt in commodity producing nations — could indicate tough times ahead.

Last year, the exceptional exporting performance of firms here helped propel the economy to grow at its fastest pace since the Celtic Tiger era.

The reasons for the huge surge year in corporation tax receipts — which took in €2.3bn more than was anticipated in 2015 — are still not fully known.

Government and other private forecasters are predicting that though goods exports will remain strong, that the economy will increasingly rely on domestic demand including a pick-up in consumer spending.

And the figures yesterday provided some support for these projections.

Vat revenues in January — which includes the high water retailing months of late November and December — rose 6.6% in the year to bring in almost €2.1bn; and revenue from income taxes — despite the budget tax cuts — rose 8.7% from January 2015 to bring in over €1.63bn in the latest month.

With the Government having forecast in the budget an increase in tax revenue this year of 5.8%, the January growth showed a good start to the year, said Conall Mac Coille, chief economist at Davy Stockbrokers.

“Last year tax revenues grew by 10.5% through the whole year. The 7.3% increase (in January) is still very strong,” he said.

The Department of Finance said the “strong” performance of Vat receipts in the month came after strong indications from retail sales and consumer sentiment surveys in December.

The income tax performance was “consistent with the recovering labour market, employment growth and increases in weekly earnings”, it said.


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