Brian Lenihan's fairy godmothers

An tSaoi02/09/2009

An Saoi: The tax returns for August throw up a few surprises, with the main shock coming from Corporation Tax. Instead of the budgeted €226M net yield, the Revenue collected a massive €533M, an additional €307M. God only knows the source of this largesse, but it would require €2,456M in additional profits to give you this type of tax liability. One or more foreign fairies were needed to produce it from nowhere. We can only hope that some of Mr. Obama’s newly hired transfer pricing specialists don’t decide that it is really their money, and ask for it back - or at least not for a few years.

Most of the other figures continue to reflect a domestic economy in crisis. Customs figures confirm that imports are anaemic, and the Excise figures (including of course VRT), while marginally ahead of forecasts, are well below 2008 and reflect a depressed local economy. Capital Acquisitions Tax, CGT & Stamp Duties remain well below target, as would be expected. However, I suspect there may be a large amount of CAT unpaid caught up in unsold assets.

The most worrying numbers are for VAT and Income Tax. VAT may fall below €10,000M, or close to 2003 levels. Reduced spending and falling prices will both hit hard at VAT levels and further cuts in Government expenditure and the spending power of employees will drag the yield further in 2010. Income Tax is falling significantly below target, despite Budget increases. Payments by the directly assessed in October and November are unlikely to be close to target, and it is possible that a large part of last year’s preliminary tax may be refunded when returns are filed

It appears Corporation Tax may well exceed forecasts, despite possibly a net negative contribution from indigenous companies. September is a key month for Corporation Tax as companies with a December year end filing their returns and the March year end companies submitting their pre-preliminary tax payment. Last September saw €520M paid and while the target for this year is just €365M, it is hard to see it being reached. However, one never knows!

After the July figures, I suggested that the likely tax figure for the year would be in the region of €31,145M. I will stick by this figure for the present, but the Corporation Tax figures are amazing.

Posted in: Fiscal policy

Tagged with: exchequer returns



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