With six weeks to go to the 2018 Budget, the latest Exchequer figures are important and give some indication of how much leeway Minister Donohoe has when it comes to tax cuts next year.
With this in mind, today’s figures represent a broadly positive set of numbers for the Government.
On the plus side, income tax figures seem to have stabilised after a couple of rocky months earlier in the year. While still down year to date on forecast, income tax receipts for the month of August were broadly on target while figures for the year to date remain well ahead of 2016 equivalent.
August is a quiet month for VAT and corporation tax receipts so there’s little to read into the monthly receipts for these tax heads, although corporation tax performed very strongly in the month. Year to date both VAT and corporation tax have performed well, with receipts on target and about 10% ahead of 2016.
Probably the biggest negative figure in today’s figures is the dip in Excise receipts, with the August figures 12% behind forecast. Interestingly, August 2016 was a similarly bad month for Excise receipts. It’s difficult to reconcile this dip with higher disposable income and generally positive consumer sentiment.
What it likely all means is that most taxpayers will see only very modest tax cuts in this year’s Budget. The expectation is that middle income earners will be the biggest beneficiaries with little to suggest any cut to the top marginal income tax rate will be accommodated in this Budget.
The biggest hope is that entrepreneurship is incentivised in a meaningful way in the Budget, bringing us closer to the UK’s more benign regime. With Brexit looming, bridging that gap has never been more important.