Income tax revenues clouded by payment issues
Payment and timing issues led to income tax revenues coming in under target last month, while corporation tax brought in much more than was anticipated, the latest exchequer figures show.
At almost €1.59bn, the Government collected €156m, or 9%, less revenue than anticipated in income tax in the month.
And at over €3.47bn, income tax revenue is running 4.9% below target over the first two months of the year due to “some late payments and payments on unearned income being lower than profile”, the Department of Finance said.
Corporation tax receipts hugely outperformed in the month to bring in €272m. But the amount in corporation tax taken in over the first two months has been affected by repayments in January and the cumulative figure came in at only €170m. Vat receipts, one of the big four tax sources, also underperformed in a non-Vat payment month because of repayments, the department said.
At a cumulative €2.9bn over the first two months, receipts from Vat are now 4.1% below target. Excise duties brought in €11m less than anticipated in February.
Overall, the exchequer took in more than €2.73bn in tax revenue in February which was 1.8% less than anticipated and collected €8.1bn over the first two months of the year, which was €50m below its target.
On spending, the figures show total net voted expenditure for the first two months amounted to over €7.95bn, 2.1% under target but up 8.1% from a year earlier.
But Davy chief economist Conall Mac Coille said the overall tax figures for January and February suggested “steady growth of consumer spending and employment”, and pointed to the “significant stimulus” from October’s budget.
The focus turns to the health of the eurozone economy and the ECB meeting in Frankfurt on Thursday.
Capital Economics in London said it believes that the eurozone economny will remain clouded by weak world growth even if trade tensions between the US and China were to fade.
“The optimistic view is that much of the weakness of external demand is due to trade tensions and Brexit uncertainty, and that both of these will fade. We think this is misguided,” the economists said.
Admittedly, a deal between Presidents Xi and Trump looks close, and the threat of a no-deal Brexit has receded. But a China-US trade agreement may not bring an end to US protectionist policies. Mr Trump may simply turn his sights on the EU. And Brexit uncertainty could drag on for a long time yet.
And signs of progress between Beijing and Washington failed to provide much support to US stocks after this year’s rally in global equities showed signs of stalling last week.
Investors focused on the outlook for global growth got a boost when China was said to plan a three percentage-point cut to its Vat tax rate for manufacturing to support its economy, which Morgan Stanley estimated could add 0.6% to growth.
“A good portion of a trade deal is already priced in because we’ve been getting these headlines for months,” Nancy Tengler, chief investment strategist at Butcher Joseph Asset Management, said. “More important than the trade deal, because the market is kind of assuming we’re going to get one, is resurgence of China growth,’’ she said.
