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Exchequer Returns April 2018 - Peter Vale commentary

Peter Vale Peter Vale

Probably the figure most eagerly awaited in today’s Exchequer figures was that for income tax. We saw a surprising dip in income tax receipts in March, something that was hard to rationalise against the strong labour market, evidenced this week by the lowest unemployment figures since 2008.

The Department of Finance previously blamed a dip in returns from the self-employed sector as the reason for the weaker than expected income tax figures.

The good news is that the April income tax receipts were healthier, with the monthly figure on target and ahead of April last year, although figures for the year to date still lag forecast by 1.1%.

April isn’t a key month for VAT receipts although it is worth noting that figures for the year to date, although ahead of last year, are below expectations. This is slightly surprising given the strength of the domestic economy.  Imports of second hand cars could be one of the reasons for this dip.

Corporation tax receipts have got some coverage this week, with Revenue predicting that the EU’s digital tax proposals, if implemented, could hit corporation tax receipts by a net figure of circa €100m per annum. 

It’s still too early to read much into the corporation tax figures, with the significant payments not yet received. There are many threats to the sustainability of the corporation tax base, including not just the digital tax proposals but also developments such as US tax reform. 

However, at this point there is no indication that we will see a significant fall off in corporation tax receipts and indeed it’s possible that the recent trend of Intellectual Property “onshoring” will see further increases in Irish corporate tax receipts. That said, threats and uncertainty exist, with the picture not likely to become clearer until later in the year. 

So overall a reasonable set of figures for April and tax receipts lagging only slightly behind target and over €500m ahead of the same period last year, which bodes well for some more significant tax cuts in October.