Positive income tax and VAT receipts were the highlight of July’s Exchequer tax returns.
Income tax figures were again strong, up 7% on July last year and 7.4% year to date, driven by both higher numbers in employment and strong wage growth.
July VAT returns were also very positive, 9.7% ahead of the same month last year and 6.9% ahead year to date, indicating ongoing strong consumer spending. However, increasing global economic uncertainty will impact on consumer confidence and we could see VAT returns impacted later in the year.
While July is a quiet month for corporation tax, year to date returns are over 15% ahead of what was a strong 2023.
However a recession in the US or a broader global economic downturn would almost certainly impact on corporate tax receipts, in particular given our reliance on such a small number of multinationals. While a recession still appears unlikely, corporate tax receipts in the key month of November would be impacted in such an event.
Hence while corporate tax receipts remain robust, uncertainty underpins their future trajectory, which may make Budget day planning more difficult for the new Minister.
Overall, another good month for the Exchequer, with tax receipts 9.5% ahead year to date, but there will be nervousness at the impact of ongoing global economic uncertainty on future returns.
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