The latest figures from the Government show that tax revenues came in well ahead of expectations in November (€177m ahead).
In the eleven months to November, tax revenues were €790m (2%) ahead of original expectations. While another strong month is needed in December, there is a possibility that the Government’s deficit forecast of 0.9% of GDP will be achieved this year.
The major reason for the outperformance in November was income tax (€252m ahead). This was due to the strong performance of self-employed tax receipts. Having underperformed for much of the year, income tax receipts are now ahead by 1% (€157m) in the year to date and up 6% year on year (yoy). This is in line with the performance of the labour market this year.
The major outperformance in the year to date continues to come from corporation tax, which is c.€1bn ahead of expectations in the first eleven months (+11% yoy). This is the second consecutive year of outperformance for this category but can be volatile and is very concentrated among a small number of large multinationals. The biggest underperforming categories are VAT (€413m behind) and stamp (€127m behind).
The figures also show that spending restraint continues with total expenditure €784m behind expectations in the year to date. It is expected, however, that much of this spending gap will be closed in December with extra funds likely to be allocated to health, social protection and capital spending.
According to Goodbody Stockbrokers, "On a headline level, Ireland will continue to make progress in its public finances in 2016. However, there are some underlying vulnerabilities. While one can make a case for one-off increases in capital spending as a use for unexpected tax receipts, increases in hard to reverse current spending is somewhat more dangerous and risks a repeat of past mistakes."
Source: www.businessworld.ie
