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Exchequer Returns July 2018 - Peter Vale commentary

Peter Vale Peter Vale

This is another good set of exchequer figures, with VAT receipts now back on track.

July saw a continuation of the growth witnessed in the first half of the year on the corporation tax front.  There has been a lot of focus on the sustainability of our corporation tax receipts, which have doubled since 2013.  While there are threats on several fronts to the competitiveness of our tax regime, there are also trends working in our favour, in particular the increasing alignment of taxable profits and substance (jobs), which has seen our tax take jump.

Income tax figures continue to disappoint slightly, with no obvious explanation given the robustness of the labour market.  While the figures are well ahead of 2017, you would expect income tax figures to have comfortably breached forecasts, which has not yet happened. 

Capital taxes are collectively ahead of both target and the prior period.  However with significant increases in asset values, capital tax receipts haven’t increased as sharply as you might expect. Relatively high capital taxes, which act as a disincentive to realising value from assets, could be a key contributory factor. This is unlikely to translate into lower capital taxes in the Budget.

Overall, it’s a positive picture for the Minister with two months to go to the Budget.