January is the second most important month for tax receipts and the biggest month of the year for VAT.
VAT receipts in January reflect trading activity over the Christmas period. Perhaps surprisingly, the figures for the month were 1% below the 2019 comparative. It looks like lingering Brexit uncertainty fed into consumer confidence over the Christmas period and depressed spending.
January is also a key month for income tax receipts and on the positive side, figures for the month were exceptionally strong, up 16.7% on the prior year. While it’s clearly early days, if this trend continues for the rest of 2020 then there could be an unexpectedly large surplus of income tax receipts come Budget 2021 in October.
January is typically a quiet month on the corporation tax front. There will be a lot of focus on corporation tax as the year progresses, with May the first key month. The Department of Finance expects corporation tax receipts to hold up this year but to drop from next year. Much of this will depend on the outcome of discussions at OCED level on proposed changes to the global tax regime. Obtaining consensus on future tax changes is looking increasingly unlikely, which is leading countries to take unilateral actions. None of this uncertainty is good for Ireland; we would be better off in an environment where there was certainty as to the make-up of the future global tax landscape.
Overall today’s Exchequer receipts make for positive reading, up over €0.5bn on the same month last year. A lingering concern will be disappointing VAT figures, although the excess in income tax receipts more than makes up for this.