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Exchequer Returns November 2018 - Peter Vale commentary

Peter Vale Peter Vale

November was a very strong month for tax receipts, with receipts over €1bn ahead of target and €3.6bn ahead of the same period last year. 

On the face of it, the figures look particularly robust.  On closer inspection it is clear that corporate tax receipts are driving much of the 2018 growth, with corporate tax alone now over €1.5bn ahead of target.  November alone saw €2.7bn in corporate tax receipts collected.

The Minister has stated that he doesn’t believe we will see the same level of corporate tax growth in 2019; on the contrary a dip in corporate tax receipts is projected next year.

While undoubtedly one off factors have contributed to the surge in corporate tax receipts in 2018, there is a general trend of the “on-shoring” of valuable intangible assets to countries such as Ireland, where real substance exists.  While there are forces pulling the other way, such as the impact of US tax reform, it is possible that there is some sustainability in the corporate tax figures.  However, given the number of uncertainties, the prudent approach is to assume that we will see a dip in the corporate tax numbers next year.

Assuming we do see a dip in the corporate tax figures, it is encouraging to see a strong VAT performance in November, bringing the figures back ahead of target for the year.

While income tax receipts are 5% ahead of target, it remains somewhat surprising that the buoyant employment market has not seen a greater surge in income tax receipts.  There is no obvious explanation for this.

So overall a very good month for the Exchequer, with bumper corporate tax receipts sheltering any concerns elsewhere.