Corporate tax revenues ‘still the star’ this year

The jury is still out on whether the Brexit fallout and the surge in the value of the euro may or may not leak revenues, but for a second year something significant is happening under our noses with corporate tax revenues.

Despite the glare on the potential loss of Vat taxes as shoppers brave the parking at the shopping outlets of Newry, Belfast, and Derry, corporate tax revenues are back in the spotlight.

The huge bounty the State has tapped from corporate taxes helped fuel a government spending bonanza last year. This year, corporate tax revenues continue to flow into the coffers.

Iphone giant Apple, predominantly, along with a few other multinationals were behind the increase in corporate tax revenues last year.

They had re-arranged their tangled international tax affairs by shipping huge amounts of so-called intellectual property onto the balance sheets of their Irish-based companies.

The extraordinary shift led to an enormous and totally artificial boost to 2015 GDP numbers, but the State did nonetheless benefit from tapping extra revenues from a big increase in the corporate tax base.

Last year the corporate tax bounty was considerable. Overall, the State collected €45.6bn in taxes in 2015. And corporate tax receipts accounted for €6.87bn of the total revenue haul — almost €2.3bn more than was anticipated.

Yesterday’s exchequer returns showed corporate tax receipts are again outperforming. In October alone, corporate tax brought in €177m more than was anticipated which brought the cumulative tax haul so far this year to almost €4.78bn.

And corporate taxes — one of the ‘big four’ tax heads —brought in €821m more than expected in the first 10 months of the year.

Without providing further details, the Department of Finance said the strong monthly performance was boosted by “the deferral of expected repayments”, which Conall MacCoille, chief economist at Davy Stockbrokers, estimates at €150m.

That suggests the corporate tax haul will still be considerable in 2016, but maybe not as huge as October’s figures might suggest.

“Following their stellar performance last year, corporate tax receipts are still the star this year,” said Mr Mac Coille.

Even before the Brexit vote and the further drop in the value of sterling, Vat receipts were weaker than expected, an odd outcome because retail sales figures in the State have been fairly robust.

There will be fears the currency effect will drive cross-border shopping and push Vat revenues lower.

In October, Vat receipts fell only €7m below target, but the cumulative picture which showed a shortfall of €286m so far this year from one of the ‘big four’ tax sources remains worrying.

The underlying picture for Vat and income tax revenues is much healthier, said Mr MacCoille, because both tax sources although performing below target are still up strongly from 2015.

The Department of Finance said that October is a so-called “non-Vat-tax month” and that, at over €10.51bn for the first 10 months, Vat revenues were €473m, or 4.7%, ahead of a year earlier.

Overall, the exchequer has taken in €36.7bn in tax revenue this year, and is “on target” to reach the budget target of €48.1bn for the full year, the department said.

From Irish Examiner  (3/11/2016)