Tax revenue for the first eight months of this year remains more than €200 million below target, the latest set of exchequer returns show.
The figures for the January to August period indicate that the Government collected just under €30.5 billion in taxes for the period, which was 0.7 per cent or €209 million less than expected at the start of the year, but nearly 5 per cent or €1.4 billion up on 2016.
They also underline the Government’s limited room for manoeuvre for tax cuts in October’s budget.
Income tax, the State’s largest tax source, was again below profile at €12.2 billion, which was 1.8 per cent or €221 million less than anticipated.
The Department of Finance blamed the apparent under-performance on its own tax forecasting model for the universal social charge (USC), which it has said overestimated the impact of wage growth on the tax.
On the upside VAT receipts, which reflect consumer spending, came in ahead of target, generating just more than €9 billion for the eight-month period. This was 1.1 per cent or €90 million above target.
Corporation tax, which was below target earlier in the year, has also rebounded, coming in at €3.9 billion, which was 1.7 per cent or €66 million above profile.
On a monthly basis, the corporate tax was 33 per cent or €80 million ahead of projections.
The other main tax head, excise duty, netted the exchequer nearly €3.8 billion, which was 2.8 per cent or €108 million below target. The underperformance in excise was again linked to the front-loading of receipts on tobacco products and weaker-than-expected car sales.
Overall, the latest figures resulted in an exchequer surplus of €1.8 billion for the eight-month period compared with a deficit of €329 million for the same period of 2016.
The department said the year-on-year improvement of €2.1 billion was primarily down to the recent sale of more than 28 per cent of the State’s shareholding in AIB.
On the spending side total net voted expenditure for the period was €29.1 billion, which was 0.8 per cent or €233 million below target, but up 5.2 per cent or €1.4 billion in year-on-year terms.
The figures show spending on health and social protection, the two departments with the biggest draw on the public purse, were €9.5 billion and €7.2 billion respectively.
The Government will be reasonably happy with the exchequer position at the end of August as it remains broadly on course to deliver on its underlying budget deficit target of 0.4 per cent of gross domestic product (GDP) in 2017, Merrion economist Alan McQuaid said.
Nonetheless, he said the shortfall in tax receipts would limit the scope for significant giveaways in the budget, which will be announced on October 10th by Minister for Finance Paschal Donohoe.
“With uncertainty over the impact on the Irish economy from Brexit, the Government can ill afford to play around with the public finances,” Mr McQuaid said. “A prudent, not a ‘gung-ho’ approach is what is required at this stage.”