EXCHEQUER RETURNS

Exchequer returns June 2019 – Peter Vale commentary

Peter Vale Peter Vale

Today saw the publication of Exchequer tax receipts for June and a chance to review the overall position for the first half of the year.

Due to a worrying dip in corporate tax receipts in May, a key focus today was on the figure for June, which is a key month for corporate tax collections.

The good news for the Minister is a much more positive showing on the corporate tax front last month.  As June receipts primarily reflect corporate profits in 2019, today’s positive numbers augur well for the year as a whole.  Year to date, corporate tax receipts are now tracking just 1.4% behind target and 3.5% ahead of the same period last year.

The sustainability of our corporate tax base remains an issue due to changes coming down the tracks as to how corporate tax profits are distributed.  Broadly, the changes could dilute the attractiveness of our low corporate tax rate as a portion of existing profits would be diverted to market jurisdictions.   While some of the OECD’s proposals would thus have an adverse impact on the attractiveness of our corporate tax regime, there are other factors at play that could work in our favour.  On balance we believe that our strong corporate tax returns are sustainable, however some level of reduction remains possible.  

Income tax receipts for the year to date are close to target and 7.7% ahead of the same period last year, with a weakness earlier in the year now appearing to be a blip.  However given the ongoing strength of the labour market it remains somewhat of a surprise that income tax receipts are not ahead of target at this point.

June is a quiet month on the VAT front but the position at the half year point is broadly positive, ahead of last year by 4.9% although almost 2% behind target.  The deficit against target is not surprising given ongoing Brexit concerns and the resultant impact on consumer confidence.   

Overall, the mid-year Exchequer position on the tax receipts front is broadly positive, with legitimate concerns last month on the corporate tax front allayed somewhat by more positive June figures.