The key numbers coming out of today’s Exchequer figures are the VAT and income tax receipts. Both VAT and income tax receipts are buoyant and reflect the improved conditions in the domestic economy. The VAT figures reflect positive consumer confidence, with both “Black Friday” and Christmas spending contributing to VAT receipts that are over €100m ahead of last year. Today’s figures don’t reflect January spending and we should see strong VAT receipts in March reflecting the January sales.
Excise duties are also ahead, reflecting increased spending on alcohol, tobacco and fuel. It is reasonable to assume that this is a sustainable number and does not reflect one-off factors, which is important in terms of determining future scope for either tax cuts or spending increases.
Income tax figures are well ahead of last year, reflecting the positive employment landscape. Of course it is likely to open up plenty of questions pre-election as to whether tax rates, including the marginal top rate, should be reduced or whether there should also be a broadening of the tax base. A broadening of the tax base would bring more people into the tax net but would see the average tax bill per taxpayer come down.
All in all this is an impressive set of figures, timely for the government as it’s almost certainly the last set pre-election.