Surge in jobs key to €1.1bn extra tax for State coffers
Finance Minister Michael Noonan declared it was “a good year for tax” as new figures show the State taking in €1.1bn more than predicted this year.
However, the minister’s pleasure at a bumper tax take risks raising the hackles of voters ahead of the arrival of water charges.
And it will also put pressure on the Government to provide greater levels of relief to hard-pressed families.
The surge in tax is being attributed to a higher income tax take due to the increased numbers of people at work. Almost half of a €3bn rise in revenue is from income tax.
There is also a surge in taxes paid by the self-employed and companies.
November’s data is regarded as especially important because it includes the bulk of taxes paid by businesses and the self-employed.
The budget deficit for the year is now €1.8bn better off than had been expected when Budget 2014 was delivered.
The latest figures suggest there will be more room to ease back on taxes and loosen spending next year, and appear to bear out the decision not to opt for deeper cuts in Budget 2015 back in October.
Analysts hailed the figures as a sign of Ireland’s continuing recovery, and Mr Noonan (inset) said we were already beating targets set in Budget 2015, just weeks ago.
“(The numbers) are pretty strong, November is a very big tax month. They’re ahead of profile. So far it’s been a very good year for tax. With 11 months gone, not only are we ahead of last year’s Budget, but we’re ahead of this year’s Budget,” Mr Noonan said.
But while the data shows VAT is 3pc above target over the year so far, it is 2.1pc, or €31m, lower than expected in November.
“The figures for VAT, which reflect activity in September and October, indicate a cautious return to spending,” said tax expert Peter Vale of accountancy firm Grant Thornton.
“In the early months of next year it will be interesting to track whether the first income tax cuts in many years translate into greater spending. For many taxpayers, particularly those on tracker mortgages, the combination of lower income taxes and lower mortgage payments will mean significantly enhanced purchasing power next year.
“This should provide much-needed impetus to the domestic economy,” he added.
The data shows the tax take is €1.1bn better than expected for the year so far, with €122m more than expected brought in from income tax, and €312m more in VAT. Excise duties are €245m better than thought.
Corporation tax, which is paid on profits, came in €209m ahead of expectations, at €4.2bn for the first 11 months of the year.
Stamp duty receipts rose by 28pc on last year, while revenue from the local property tax rose by more than 50pc. Government expenditure fell by 1.4pc, fuelled by a sharp fall in interest repayments on debt.
Investec chief economist Philip O’Sullivan praised government plans to pay back €9bn of the money Ireland owes to the IMF early in order to save on interest repayments.
“The more debt that we refinance cheaply, the lower our interest costs, the better our public finances, the better our debt sustainability, and the more positive the market views Ireland,” he said.
But Mr O’Sullivan warned that health spending showed signs of indiscipline. Overspending on health totals €580m, although this is offset by savings in other departments, leaving current public spending at €262m over target.
The figures show Ireland’s budget deficit stands at €5.76bn. The deficit was €8.57bn at this time last year. Reducing, and eventually eliminating, the deficit is regarded as a mainstay of post-bailout policy.
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