Today’s exchequer figures are realistically the last set of exchequer numbers likely to have an impact on Budget 2019, to be announced early next month. Hence they were eagerly awaited.
Overall, the figures can be best described as a mixed bag.
Income tax is down slightly on target but still 6.8% ahead of the prior year. Again this is slightly surprising given how the labour market has outperformed.
Corporation tax, the poster boy of our tax revenue growth to date, actually dipped significantly in August. However August is not a major month for corporation tax receipts and we wouldn’t read too much into this. Overall in the year to date, corporation tax gains are sheltering some significant deficits elsewhere, in particular excise duties.
While this dependence on corporation tax is a concern, and despite threats to the Irish tax regime on several fronts, at the moment we continue to believe that strong corporation tax receipts is a sustainable feature of our tax base.
August was a weak month for VAT, blamed by the Department on larger than expected repayments. VAT has a had mixed year, ahead of the prior period but not ahead by as much as one might expect given the strong economy. A weaker sterling and additional purchasing power in the UK is likely to be a key factor in this.
Overall the figures are likely to be seen by the Department as neutral in terms of influencing Budget decisions next month. Expect to see plenty of kite flying in coming weeks. However the main winners on Budget day will reflect previous years, with low to middle-income earners set to gain most.