While today’s Exchequer figures likely come too late to influence next week’s Budget, the receipts will give some comfort to the Government that there is enough headroom to provide the anticipated €300m or so tax cuts.
Of significance is the more positive income tax receipts for September, following a weak August. While the figures for September are below target, they are ahead of September 2015 and indicate that the previous month may have represented a blip inconsistent with the positive jobs market data. However, income tax figures in particular will be closely scrutinised in the coming months.
VAT receipts have been a cause for concern in recent months. The figures in September show a slight improvement, with figures coming in ahead of target for the month, but still 2.7% behind forecast for the year as a whole. With the exception of certain sectors, in particular motor, increased disposable income is not translating into the expected spending. Brexit concerns may be further fuelling this trend. Whether further income tax cuts next year can reverse this pattern will be key.
On the more positive side, corporation tax receipts continue to soar and are now over 18% ahead of target, most likely driven by the results of large MNCs with significant Irish operations.
On the Budget speculation front, while the basic CGT rate of 33% is unlikely to change, incentives for entrepreneurs are expected, including a lower 10% tax rate on gains of up to €10m. It will be disappointing if this is restricted to new businesses only and not available to existing entrepreneurs, which would effectively penalise those who invested in the past, including in the recession years.