Exchequer Returns

Exchequer Returns May 2019 - Peter Vale commentary

Peter Vale Peter Vale

May is a significant month for tax receipts, second only to November in terms of taxes raised. The focus this month was on corporate tax and VAT in particular.

On this note, of some concern to the Minister will be the disappointing corporate tax figures for the month, which left a €233m deficit against target for the year to date.  The Department of Finance had previously cautioned that 2019 would see a dip in corporate tax receipts due to one off factors in 2018.  However the deficit against target is of concern.  That said, June is an even more significant month for corporate tax receipts and will provide an even better indication of where the figures for the year will land.   

The sustainability of our corporate tax base is again in focus following the release of the latest OECD corporate tax proposals.  While some of the OECD’s proposals would 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.  As noted, the dip in May corporate tax returns is a concern.   

On the positive side, income tax receipts for the month were strong, almost clawing back the deficit against target that arose earlier in the year.  Assuming a continuation of this trend, we would expect income tax returns to hit target for the half year next month.

The good news on the VAT front is that some of the year to date deficit against target was clawed back in May.  However overall, while ahead of the same period last year, VAT receipts for the year to date are 1.5% behind target. 

Overall, May was a mixed bag for the Exchequer.  Positive returns on the VAT and income tax front need to be balanced against an unexpected dip in corporate tax receipts.  Given how in previous years corporate tax has provided a buffer against deficits elsewhere, there will be particular interest in the June corporate tax numbers.