While overall May was another strong month for the Exchequer, there were some signs of a slowdown in key tax heads.
On a positive note, income tax receipts are running at 9.4% ahead of the same period in 2022. Concerns of a lag before the adverse impact of technology sector job losses was felt appear to have abated, with the ongoing strength of the labour market driving the tax figures forward.
While VAT figures year to date are running 11.7% ahead of last year, the month of May saw receipts a much smaller 2.7% ahead of May 2022. This would suggest some slowdown in consumer spending and also likely reflect the adverse impact of higher interest rates on discretionary spending power. The Department also notes that timing issues may play a part in the weaker numbers.
It was a similar situation with corporation tax receipts, over 20% ahead year to date but relatively weak receipts in May. This again points to the volatility in corporation tax receipts and will place even more focus on the critical month of June. Positive June returns would suggest full year corporation tax figures will be strong. However any weakness in June may indicate lower than expected full year figures.
It would be wrong to read too much into one month and at the moment it looks like strong corporation tax receipts will help generate large Budget surpluses for the foreseeable future. However our dependence on a small cohort of companies for much of the revenues remains a concern.
In summary, a mixed month for the Exchequer and all eyes on the critical month of June.
