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Exchequer Returns October 2017 - Peter Vale commentary

Peter Vale Peter Vale

The first set of exchequer figures post-Budget will make for pleasant reading for Minister Donohoe. They contain no great surprises, with figures for the month well ahead of target, albeit a Budget/tobacco related surplus in excise duties the main reason.

October was a strong month for income tax, with a 2% surplus against target.  However, it is worth noting that up until now, exceptionally strong employment data has failed to translate into buoyant income tax receipts. The figures for the year to date are 1% below target; you would have expected stronger tax data given unemployment has plummeted to 6.3%. 

If as speculated employment growth has been fuelled by lower paid or part time roles, thus explaining the more modest tax increases, it will be interesting to see the impact of Budget 2018 on income tax receipts next year, given that lower earners did relatively well in the Budget.

While October is a quiet month for VAT, overall the VAT figures for the year are broadly on target and well ahead of last year.

Corporation tax continues to prop up much of the growth in our tax receipts, with October again a strong month. While positive, we can't ignore the longer term threats to our corporate tax base, with the EU in particular seeking changes that would adversely impact smaller countries such as Ireland. 

Longer term, an increase in tax revenues from wealth taxes, such as property tax, would act as a hedge against a fall in the corporate tax take. For the moment however, such a move looks unlikely and we have to hope that the proposed EU changes lose momentum so that corporation tax continues to outperform.

Given that we're so vulnerable to external factors, it's almost impossible to accurately predict the level of future tax receipts. However, at the moment, there's nothing to suggest that 2018 won't be another strong year on the tax collection front, with the possibility of even stronger than expected corporation tax receipts propping up any slippage elsewhere.