Tax receipts for the first nine months of the year are still running behind target, suggesting Minister for Finance Paschal Donohoe will have little scope for giveaways in next week's budget unless he raises taxes elsewhere.
The latest update on tax revenues came as the Department of Finance upgraded its growth forecasts for the Irish economy to 7.4 per cent for this year, from 5.6 per cent previously, and to 4.2 per cent for next year (from 4 per cent) on foot of sharper-than-expected growth in the domestic economy.
The forecasts, which will underpin the Government’s tax and spending plans for next year, were endorsed by the Irish Fiscal Advisory Council.
As budget meetings continue in Government Buildings, the latest exchequer returns show the Government collected €37.5 billion in tax so far this year.
While this was €1.9 billion or 5 per cent ahead of last year, it was slightly (€127m) below expectations. The figures also show that overspending in the Department of Health has now ballooned to €300 million, nearly double what it was at this point last year.
Mr Donohoe said the figures were broadly in line with forecasts, while expenditure remains within expectations. "This means that we are currently on track to meet our fiscal targets for 2018, providing a stable platform for Budget 2019. "
Nonetheless, he warned that “continued strong economic growth” could not be taken for granted given the uncertain economic environment facing Ireland internationally.
Tobacco
The below-profile exchequer performance was driven in the main by excise duty, which came in 8 per cent or €339 million below profile. This was blamed on retailers stockpiling tobacco imports ahead of the introduction of plain packaging on cigarettes. Officials insist this will wash out of the system in the coming months.
Income tax receipts, which account for around 40 per cent of the Government’s total tax take, generated just over €14.5 billion, which was on target for the year and nearly €1 billion up on last year, reflecting the strong level of employment growth in the economy.
VAT, which reflects conditions in the retail sector, came in €39 million below target at just under €11.6 billion, but was significantly up on last year.
In keeping with previous months, corporation tax was the star performer, generating €5.1 billion, which was €306 million or 6.3 per cent ahead of expectations.
Revenue generated from the business tax has doubled since 2015, and is on course to eclipse €9 billion this year. The Government has been warned by many commentators not to use the current windfall to fund permanent spending measures given the increasingly uncertain outlook internationally.
Overall, the latest numbers pointed to an exchequer deficit of just under €1.5 billion for September, compared to a surplus of €2.3 billion at the same point last year.
When adjusted for the impact of the AIB share sale in 2017, the exchequer balance shows an underlying annual decrease of €381 million, primarily as a result of increased expenditure.
Expenditure
Spending came in marginally below expectations, with total net voted expenditure to the end of September put at just over €36 billion, which was 0.1 per cent, or €45 million, below profile.
Peter Vale, tax partner with Grant Thornton, said: “Anyone expecting any major surprises in the final set of exchequer figures pre-budget will have been disappointed. This was another solid set of figures, with the overall tax take year to date close to target.”
Mr Vale said he expected several new revenue-raising measures to be introduced in the budget next week, with VAT and stamp duty the most likely to see changes. “Similar to previous years, the main beneficiaries will be lower-and middle-income earners.”
