Irish Exchequer Returns: Corporation tax up €2.3bn on target
Irish Exchequer Returns for the 11 months to November show that corporation tax was up €2.3bn on the 2015 target and €2.2bn up on 2014 while overall tax revenues of €41.9bn were €2.9bn above target. Receipts were €3.8bn or 10% ahead of the same period in 2014.
The Exchequer posted a surplus of €343m — the first since 2007 — compared to a deficit of €5.8bn in the same period last year. The Department of Finance said the "improvement in the Exchequer balance is driven by increased tax and non-tax receipts, slightly reduced expenditure and a number of one-off transactions. Without the one-off transactions, the improvement in the deficit would be c. €4.8bn."
Michael Noonan, finance minister, commented:
Corporation Tax receipts have been particularly strong, finishing the month €312m or 24% above target. The Revenue Commissioners have advised me that this over-performance is primarily related to improve trading conditions and is broad based.
Half of it is likely related to Apple:
High corporation tax receipts may continue for some years but the likes of Facebook UK continuing to report losses while half the global revenues are booked in Dublin, will end in coming years.
Income tax receipts of €16.6bn were collected to end-November 2015, a year-on-year increase of €801m or 5.1%, and is €51m (0.3%) above target. The Department said: "This solid performance is consistent with the recovering labour market, employment growth and increases in the average weekly earnings."
For the month of November, income tax was up €69m (2.6%) year-on-year, but slightly below target (€44m or 1.6%).
The first eleven months of the year saw VAT receipts of €11.8bn collected, which represents an increase of €934m or 8.6% when compared to the corresponding period last year and €341m (3.0%) above target. "These strong receipts are reflective of improved consumer confidence and spending as evidenced by the performance of retail sales for the year to date. November is a VAT due month and receipts for the month of €1.7bn were €178m (11.6%) above target," the Department said.
Conall Mac Coille, chief economist at Davy, commented: "The exceptionally good corporation tax revenues have raised concerns that they may be temporarily strong. However, the Irish Revenue has indicated that all but €300m of the €2bn corporation tax outperformance in 2015 will probably be repeated next year. However, corporation taxes are now 58% ahead of last year’s Budget projections – demonstrating the extreme difficulty in predicting them accurately.
That said, the pharmaceutical sector is bouncing back after the ‘patent cliff’, suggesting that corporation tax revenues should be sustained. The ICT sector continues to expand, and ‘on-shoring’ of corporation profits should help Irish tax revenues. The other key feature of today’s tax returns was VAT receipts, which were €178m (or 11.6%) ahead of target in November. Overall, VAT receipts have grown by 8.6% in 2015, reflecting the rebound in retail sales, and are now 3% ahead of target.
Extra €1.5bn of spending announced at Budget still not spent: The government announced an additional €1.5bn of spending for 2015 – largely carrying through into 2016, prior to the Budget for 2016. The extra €1.5bn was allocated towards Health, higher social spending and other projects. However, with just one month remaining in the Budget year, primary expenditure remains just €157m over-budget. The additional €1.5bn will now have to be spent in December.
We understand from the Department of Finance that over €1.0bn of additional spending will occur in December — mainly Health spending and the Christmas bonus. Nonetheless, many departments are under-budget, including Agriculture (€151m), Defence (€52m), Environment (€209m) and Foreign Affairs (€45m). Ironically, this could make the government’s task of meeting the 1.8% expenditure growth benchmark rule in 2016 more difficult — by lowering the base in 2015."