Tax receipts up 8.5% in year but Vat under scrutiny

Tax receipts are up 8.5% in the year and the Government has €644m more in its coffers than it expected, exchequer figures show.

However, analysts expect some sort of dampening to Irish economic growth from the UK’s decision to leave the EU.

For that reason, a continuing shortfall in Vat payments in the latest figures has come under scrutiny.

It is too early to look to the exchequer figures for any Brexit-related hit on receipts here, despite a shortfall of €61m in Vat receipts in the month, said Philip O’Sullivan, chief economist at Investec Ireland.

“Tax receipts are growing and in a pretty strong position as we head into more uncertain times,” he said.

The tax and spend figures for the first seven months of the year showed receipts came to €26.61bn, up by more than €2bn from the same period in 2015.

The figures will be closely scrutinised by Government ministers as the Fine Gael minority-led government prepares its 2017 budget in approximately 10 weeks’ time.

Boosted by a much stronger than expected outturn for corporation tax and excise duties, the exchequer took in €644m more in revenues than was anticipated at this stage of the year.

Vat receipts remain under the spotlight, however, as they again underperformed. Most economic forecasts assume a recovery in consumer spending this year will boost revenues.

At €7.99bn, Vat revenues brought in €292m less than anticipated over the full seven months. Officials said that Vat receipts were up from last year but the figures and repayments of Vat will be kept under scrutiny.

Corporation taxes also remain under the spotlight but for different reasons. The CSO made huge revisions to its 2015 economic growth figures, to take account of a small number of large companies incorporating in Ireland.

At €3.29bn, corporation tax revenues took in €482m more than was anticipated over the first seven months, but underperformed in the latest month. Economic clouds, however, could be gathering because of the Brexit.

An Investec Ireland survey of Irish purchasing managers earlier this week signalled Irish manufacturing was facing a slowdown, as the drop in the value of sterling since the UK’s June 23 vote weighed on orders from Irish factories.

Goodbody Stockbrokers cut its Irish growth outlook, projecting the UK is heading into a recession on its Brexit decision.

The exchequer figures show that other consumption-related taxes underperformed in the latest month, but were ahead of target in the seven months.

Excise taxes took in almost €3.65bn through July. That’s €376m more than anticipated. Income tax receipts, including USC, at €10.29bn, were exactly on target.

Davy Stockbrokers chief economist Conall Mac Coille said that with €644m more than anticipated in revenues after seven months the exchequer was cushioned should consumer spending here be dampened by any Brexit fallout.

Expenditure figures showed net overall spending, at almost €24.4bn, was €120m less than anticipated in the first seven months.

“Encouragingly, 15 of the 16 departments were under the profiles based on the budget estimates,” the Department of Finance said.

Health spending would likely fall into line after new spending figures come into effect, it added.


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