Irish tax €1.7bn ahead of target; Corporation tax up €1.2bn
Today's Exchequer Statement for September 2015 shows that the position of the Exchequer continues to improve with the underlying Exchequer deficit in 2015 at €2.1bn compared to an underlying deficit of c. €6.1bn in 2014 (excluding all of the substantial one-off transactions). This equates to a year-on-year improvement of c. €4.0bn on the back of increased tax and non-tax revenue and reduced expenditure.
Non-tax revenues of €2.9bn at end-September, were up €674m (30.5%) in year-on-year terms. The primary reason for this is the increase in the surplus income from the Central Bank of c. €500m.
Tax revenues are 5.8% ahead of target, with €31.6bn collected up to the end of September, representing a year-on-year rise of €2.74bn and €1.74bn ahead of the Budget 2015 target.
Commenting on the strong performance of tax revenues, Michael Noonan, finance minister, said: “Overall, the tax performance for the first nine months of 2015 is ahead of expectations, with a very strong performance across all the major tax heads reflecting better than expected economic growth in 2015. The tax performance has been very strong through the first nine months of the year, with tax revenues 5.8% above target and up nearly 9.0% on an adjusted basis, in year-on-year terms. This provides a very solid base heading into the final quarter of the year and Budget 2016”.
Income tax receipts of €12.4bn were collected to end-September 2015, a year-on-year increase of €677m or 5.7%, and is €118m (1.0%) above target. For the month of September, income tax was €27m or 2.2% below target.
The first nine months of the year saw VAT receipts of €9.7bn collected, which represents an increase of €742m or 8.3%, when compared to the corresponding period last year, and is €222m (2.3%) above target. The Department of Finance said these strong receipts are reflective of improved consumer confidence and spending as evidenced by the performance of retail sales for the year to date, up an average of 9.0% and 5.6% in volume and value respectively. September is a VAT due month and receipts for the month of €1.7bn €115m (7.1%) above target.
Corporation tax receipts to end-September were €3.9bn, which equates to a €1.2bn(45.7%) increase when compared to the same period last year and is €1.2bn (44.2%) above target. The over-performance in the year to date is broad based and primarily relates to improved trading.
Excise Duties totalled €3.8bn to end-September, representing a year-on-year increase of approximately €211m (5.9%) and is slightly below target (down €16m or 0.4%). Excise receipts for the month of September amounted to €385m, which were €40m (9.4%) below target.
€846m was collected in Stamp Duties receipts to end-September, down €186m (18.0%) year-on-year and up €82m (10.8%) against target. For the month, stamp duties were €4m (1.8%) below target.
Local property tax receipts to end-September amounted to €366m, which is €10m (2.8%) above target
Total Exchequer debt servicing costs at end-September 2015 were €4.7bn.
Peter Vale, tax partner at Grant Thornton commented:
"The last set of Exchequer figures prior to Budget 2016 will further increase the pressure on the Minister from those advocating substantial tax cuts. The figures show buoyant tax receipts, underpinned by robust employment numbers, strong consumer spending and impressive trading performance by companies. It’s likely that the healthy Exchequer position will lead to greater than expected tax cuts, with the lower/middle income bracket likely to benefit most. As these cuts will provide a greater incentive to work, it’s also likely that cuts in income tax rates will not translate into lower income tax receipts next year. Longer term however, we are likely to see a rebalancing of tax revenues, with a reduction in the income tax percentage and a greater percentage of tax revenues coming from wealth based taxes. It seems likely that higher earners will not see a reduction in the top marginal rate, which is disappointing in the context of attracting senior people to Ireland and incentivising others to stay. Many of those on higher incomes are responsible for the creation of significant employment. On the positive side, the Minister may feel the time is right to provide tax relief to entrepreneurs and small businesses. Ireland lags well behind the UK in this regard. Targeted tax reliefs can increase employment and productivity, ultimately costing little or nothing to the Exchequer."
Dermot O'Leary, chief economist at Goodbody commented:
"Deficit is 1.4% of GDP better than estimates: The latest set of Exchequer figures, covering the nine months to the end of September, further underline the progress being made on deficit reduction. This is the last set of figures before the 2016 Budget is announced. Overall, the deficit (general government items only) was €3.0bn in the first three quarters of 2015 versus €6.2bn in the same period in 2014. This is €2.9bn (1.4% of GDP) better than original government expectations, and means that the budget deficit is now likely to finish below 2.0% of GDP in 2015. Debt to fall below 100% of GDP: Although the budget deficit will come in lower than expectations in 2015, it should not change the arithmetic behind the fiscal space in 2016 as this is calculated by way of EU fiscal rules, particularly the “expenditure benchmark”. Medium-term growth potential is the key input here and is not impacted by this year’s budget outturn. There is an opportunity for the government to use this outperformance for one-off capital spending increases that should not be repeated in 2016. Finally, it is now highly likely that gross debt will fall below 100% of GDP by the end of the year."