Tax take down last month but ahead for year to date

The Government’s tax take was down significantly in October, although it was ahead of schedule for the first 10 months of the year.

If the slowdown in tax revenues continues over November it would heap further pressure on the Government ahead of December’s budget.

“The exchequer figures for October are probably the weakest set of figures so far this year. It is typically a quiet month for tax receipts with November being a far more important month in terms of both income tax and corporation tax receipts,” said Peter Vale, a partner at the consultancy firm Grant Thornton.

“We have to hope that October was merely a blip and that the broader trend observed in the year to date of figures exceeding target resurfaces in November.

“It is likely that the minister [for finance] will need to hold off on some of the key December budget decisions until as late as possible so that real-time exchequer information for the hugely significant month of November is available.”

Tax revenues for October came in at €2.2bn, which was €289m behind expectations. Most of the shortfall stemmed from an under-performance in the corporation tax category, which came in at €210m, against a forecast €435m.

The exchequer deficit was €14bn at the end of October, down substantially on the €22.1bn deficit 12 months ago.

Two key factors were behind the reduction: A one-off recapitalisation of the banking system in Jul 2011; and last March the Government issued a bond instead of paying the €3.1bn promissory note to the IBRC.

Overall, tax revenues were ahead of target for the first 10 months of this year. The total tax take at the end of October was €28.35bn, which was €96m — or 0.3% — ahead of expectations.

According to the Department of Public Expenditure and Reform, on an adjusted basis, “that is adjusting for delayed corporation tax receipts from December 2011 and the PRSI/income tax reclassification issue, tax revenues are an estimated 4.3% up, year-on-year.”

In a positive development for the Government, income tax and Vat have held up well over 2012. However, excise duties have come in below target.

“On the spending side, total voted expenditure was €251m less than had been expected during October. Year-to-date voted expenditure, at €36.7bn, is now only €88m, or 0.2%, more than had been forecast,” said NCB Stockbrokers economist Philip O’Sullivan.

“Of the 16 key expenditure headings, 13 of them have come in below expectations, with Health €289m over-budget; Social Protection €434m over-budget; and Transport €16m over-budget the three outliers.”