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Exchequer returns January 2019 – Peter Vale commentary

Peter Vale Peter Vale

VAT receipts were the most interesting part of today’s Exchequer figures, as they took in the key Christmas trading period.

Perhaps surprisingly, the VAT figures were very solid, over 11% ahead of the same period last year, despite anecdotal evidence of a slower than expected trading period for retailers.

Concerns that the relative increase in online sales as a percentage of overall sales could reduce the VAT take for the Exchequer have also not materialized, although this is not that surprising given that the majority of online sellers would be required to charge Irish VAT on their sales.

The income tax figures for January are also impressive, up over 7% on last year, making it a positive start to the year for two key tax heads. January is a quiet month for corporate tax receipts so we wouldn’t read much into the dip in corporation tax receipts.

It’s worth noting that the Minister expects a fall in corporation tax receipts compared to last year. 2018 was a bumper year for corporation tax, with accounting changes producing what is expected to be a one off bounty for the Exchequer.

The Minister will be concerned at developments at OECD level regarding the possibility of a new set of tax rules governing digital economy activity.  If implemented, these proposals could erode the attractiveness of our low corporate tax regime, with a knock on impact on corporation tax receipts. This is a medium to long term threat but one over which we have little control, making the task of predicting future tax flows difficult.

So overall a solid set of figures, with more good news than bad, and a strong start to the year.