Tax outturn: you read it first here

An Saoi: The Sunday Business Post’s front page tells us that the Government are expecting tax to be nearly €3,000M short in the current year.

This figure, of course, has been known to readers of Progressive Economy for some time. For example, you were informed here after the publication of the September figures, here after the publication of the August figures, or even here after the publication of the July figures. Having thrown all modesty out the window, you can further check out previous musings on the subject for the June figures, May and finally April. May I tell the Dept of Finance that I am using nothing more than a standard spreadsheet, no complex economic models and it consistently produces figures that are closer to outturn than theirs.

A secondary problem has now developed in tax collection, apart from the economic collapse. Many previously compliant taxpayers are pleading inability to pay, and current arrears are increasing rapidly. While the Revenue branch of the AHCPS has pointed this out regularly, the union’s members in Dept. of Finance didn’t bother to listen. On 3rd October I wrote the following on this site,

“Non-payment of taxes looks to me to be as another major component in the decline in tax yield. The Revenue branch of the AHCPS has made this clear to its own union and to other members of Congress that non-payment of declared liabilities is a huge issue. This suggests to me that the underlying state of Irish business is perhaps even worse than is being suggested. A business, which owes more than a few months tax is unlikely to survive.”

On the 10th August,

“Outside of workers with multi-nationals and in the Public Service, very little Income Tax is being paid. Tax may be deducted by many employers, but the union representing Tax Inspectors suggests that it is not being paid to the Collector General. Much of the collapse in employment has affected a core group of taxpayers, males in well-paid full-time employment.”

Yet the approach is now to cut further. The withdrawal of at least €4,000M from the Irish economy will further reduce the yield from taxation having a minimal net gain to the Exchequer. Factoring in an even greater cut because of the shortfall in 2009 may mean that they will want to cut up to €6,000M in the coming year. A cut of 4% of GNP - it seems Fianna Fáil wish to return us, Pol-Pot-like, to the 1950s.

Posted in: Economics • Fiscal policy

Tagged with: exchequer returns • Deflation