Stamp duty shortfall muddies budget targets
A significant shortfall in commercial stamp duty revenue — as part of an overall first-quarter tax take that missed targets — has raised doubts about the accuracy of the Government’s budget expectations.
Latest exchequer returns show the Government took in just shy of €12bn in tax revenue in the first quarter. While that was up by 3.5% year-on-year, it was marginally down on expectations.
In all, tax revenues for the first three months of the year came in at 1.2% — or €141m — below target.
The figures also show a widening of the exchequer deficit, with it rising from €903m to just over €1.1bn year-on-year. This was largely due to an increase in Government spending.
A lower-than-expected level of returns filed by the self-employed saw income tax receipts come in 1.7% lower than target for the quarter. At nearly €4.7bn, the income tax take was up by 5.7% on a year-on-year basis. However, for March alone income tax revenues were more than 6% short of target at €1.33bn.
Corporation tax missed quarterly targets by 0.7%, but was up 2.3% annually at €532m. In March, corporation tax receipts amounted to €319m, 4% ahead of target for the month.
March was also a Vat month and saw revenues from that tax source of €1.9bn for the month and nearly €4.7bn for the quarter — both figures ahead of target.
“There was some concern at the drop-off in Vat compared to last year, but [the latest] numbers will have done much to allay those fears,” said Grant Thornton tax partner Peter Vale.
“The early months of the year aren’t typically key for corporation tax so we wouldn’t read much into the figures at this stage. For what it’s worth, the numbers are on target at this point.”
The main shortfalls — both in March and for the quarter — were in excise and stamp duty receipts. The latter amounted to €302m for the three months, nearly 12% — or €40m — short of target. That heading’s monthly total, of €73m, was almost 29% short of expectation.
In the October budget, Government increased the commercial stamp duty rate from 2% to 6%, hoping to yield an extra €375m, and promising the move would “get the commercial property market moving again”.
“The €40m shortfall in the first quarter will surely raise concerns that the Department of Finance may have overestimated the likely additional revenues from the measure. That said, it is still too early to discern clear trends,” said Conall Mac Coille, chief economist at Davy Stockbrokers.
Mr Vale added: “Sustainability of our tax receipts, in particular corporation tax, continues to get much coverage. In our view, despite significant developments on the international tax front, we shouldn’t see any dramatic drop in tax revenues. On the contrary, the limited shelf life of traditional offshore tax havens is likely to see more taxes paid in countries such as Ireland, where real operations are housed.
“That said, threats and uncertainty exist, with the EU’s digital tax proposals ticking both of these boxes.”
Finance Minister Paschal Donohoe said that the first-quarter figures “illustrate solid growth in tax revenues, which in turn is underpinned by an improving economy.”
“These first-quarter figures represent a good start to the year and provide a platform to help achieve our annual targets,” he said.
