Minister for Finance Michael Noonan has played down the significance of chancellor of the exchequer George Osborne's announcement that UK corporation tax could be cut to less than 15 per cent.
Mr Noonan said the announcement was not as “dramatic at it might appear” as Britain had previously signalled a cut to 17 per cent by 2020, which he said was “not a million miles away” for the new rate.
He was speaking as the latest exchequer returns showed tax receipts were now running €742 million or 3.4 per cent ahead of projections, with corporation tax and excise receipts again performing strongly.
The latest half-year figures, however, represented a slight tightening of the surplus enjoyed at the end of May, when tax revenues were 4.3 per cent above profile. Department of Finance officials indicated that about half the outperformance could unwind by the end of the year, resulting in a more modest tax overhang of about €500 million.
Corporation tax, which surged to record levels last year, remained the largest contributor, coming in 19 per cent or € 505 million ahead of target at € 2.67 billion.
Overpayments
The receipts are linked to overpayments by a small number of big multinationals in the tech sector, a significant portion of which is expected to be reclaimed later in the year.
The other strong-performing tax head was excise duty, which amounted to €2.76 billion for the period, some €401 million or 14.5 per cent ahead of projections. This was linked to increased imports of cigarettes ahead of the introduction of plain packaging.
Mr Noonan reiterated that the potential collateral damage from Britain’s vote to leave the EU will not derail his plans to further increase spending and cut taxes in the upcoming budget.
“The exchequer returns for the first half of 2016 show our plans to fund vital public services are on track and that collecting revenues from a broad base continues to pay dividends for Irish taxpayers,” Mr Noonan said.
He said the figures were consistent with a budgetary adjustment – or fiscal space – of €1 billion, which had already earmarked for Budget 2017.
Minister of State for Finance Eoghan Murphy said last night the figures would be received by Government as a confirmation its budgetary plans remain on course despite economic concerns over the impact of Brexit.
On track
Mr Murphy said they were reassuring and confirmed the Government’s approach to Budget 2017. “All of the factors that contribute to the calculation for the 2017 budget are still on track. We do not need to make any changes to the plans,” he said.
The economy is forecast to grow faster than any other in Europe for the third straight year in 2016, but Mr Noonan recently cut the forecast for 2017 while warning it could be further reduced if Britain voted to leave the EU.
A senior department official said he did not expect uncertainty in Britain to affect the Government’s projections this year. However, he held out the possibility a weaker sterling could increase the level of cross-Border shopping with a knock-on effect for VAT.
