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Exchequer returns September 2019 – Peter Vale commentary

Peter Vale Peter Vale

The latest Exchequer figures paint a positive picture on the tax receipts front, with a €674m surplus over target and a €3.2bn increase on the same period last year.

There was a strong performance across all the main tax heads.

Income tax receipts are finally ahead of target for the year and up 8.4% on the same period last year. The strong labour market is feeding directly into these numbers.

While VAT receipts were also strong for September, the VAT figures for the year to date are slightly behind target, although ahead by 6.4% on the prior year. Given all the uncertainty on the domestic and global economic front, the fact that consumer spending has held up so well is remarkable.

Probably the strongest performing tax head is corporation tax. Figures for the year to date are €558m ahead of target and €680m ahead of last year. Given that at one point the Minister was expecting a dip in corporate tax receipts in 2019, this is another remarkable outturn.

The great unknown is how sustainable the corporate tax base is. Developments to date have been very positive for Ireland, with an increasing alignment of taxable profits and substance boosting the coffers here. However a move towards allocating taxable profits to market jurisdictions would put that corporate tax take in jeopardy, with a slice of tax revenues moving to other countries. Uncertainty remains as to where things will ultimately land but in the short to medium term it looks more likely that the current level of corporate tax receipts can be maintained.

So in summary a good day on the tax receipts front but not one that will sway the Minister to open the coffers. We fully expect a prudent Budget next week, with little in the way of tax cuts, although there may be relief for some Irish indigenous business owners/entrepreneurs.

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