The Government’s tax take for the year was 2.4 per cent or €282 million behind target in March on account °of weaker-than-expected income tax receipts, the latest exchequer returns reveal.
The Department of Finance said the shortfall in income tax related in part to the under-performance of Universal Social Charge (USC), which was €60 million or 7.5 per cent below profile.
Principal officer John Palmer said there was no real explanation for the divergence between USC and PAYE, which continues to perform strongly, and that €60 million was not a large sum in the context of annual income tax take of €19 billion.
Overall, income tax, the Government’s main tax head, undershot the department’s target by nearly 4 per cent or €180 million this year, coming in at €4.1 billion for the three-month period.
The weaker trend runs counter to the healthy employment growth evidenced in other indicators.
Corporation tax
Corporation tax also underperformed the department’s target, coming in 25 per cent below expectations at €520 million. On a monthly basis, it was nearly 40 per cent or €163 million below profile.
Mr Palmer also dismissed concerns about weaker company tax receipts, saying so it is too early to be overly concerned about the shortfall as most of the big months for corporation tax come later in the year.
The below par performances in income tax and corporation tax were partly offset by strong VAT returns.
The figures showed €4.56 billion was collected via the sales tax in the first three months of the year, which was 3.4 per cent or €151 million above profile.
Better-than-expected VAT receipts are reflective of a pick-up in conditions across the retail sector, which has been slower to recover from the crash than other sectors.
Excise duty was 6.6 per cent below target at €1.27 billion, which was again linked to the front-loading of receipts on tobacco products ahead of plain-packaging rules.
Minister for Finance Michael Noonan said tax receipts overall were up on last year and today’s unemployment figures, which put the State’s jobless rate at a nine-year low of 6.4 per cent, helped explain the increase.
However, he acknowledged the receipts were slightly behind expectations for the year to date.
“The Department of Finance will monitor that and the Government will ensure that taxes can be set at an appropriate level and vital public services can be paid for,” he said.
The latest figures pointed to an exchequer deficit of €903 million compared with a deficit of €1.17 billion for the same period last year.
The department said the €66 million improvement was primarily down to an improved tax take, which is partially offset by increased expenditure.
Spending
On the spending side, total net voted expenditure was just over €10.7 billion, which was up nearly 5.7 per cent or €583 million on last year.
The figures show spending on health and social protection were €3.5 billion and €2.68 billion respectively.
Both departments were, however, inside their targeted budgets for the year to date.
Davy chief economist Conall Mac Coille said that accounting for a timing effect relating to the country’s EU budget contribution, Ireland’s public finances were probably closer to €200 million behind budget targets in the first quarter of 2017.
