April figures

An tSaoi06/05/2010

An Saoi: I said last month that April is a boring tax month with little happening. I had half intended skipping over making any comments but these figures are intriguing. They clearly show something is happening in the economy. What exactly it is, I am not sure.

The increase in Customs duties is massive and if it continues over the next few months will be a clear sign of increased activity in the economy. The increase in Excise maybe mainly down to the increase in car sales but currency movements and the decline in duty on alcohol may also be influencing the figures. Again this is a sign of increased stabilising or increased activity. The almost complete collapse in Capital Gains Tax reflects little or no activity in the disposal of assets. What little activity there is may be arising from forced sales, where any gain is being offset against existing losses.

The increase in CAT may be a product of the drop in CAT thresholds last year and also increased Revenue audit activity in the area. A small number of settlements would be enough to increase the yield significantly. The lack of any movement in stamp duty suggests that there is little movement in the property market. Income tax has stabilised at a very low level, despite the huge personal tax increases by way of the levies. Planned Public Sector job cuts and continued reduction in spending may see Income Tax falling again from summer onwards because there is little sign of the private sector hiring. The VAT increase is I assume from the same source as the Customs duties, on imports from the outside the EU (VAT at point of entry still applies)

Corporation Tax is up significantly, but this maybe down to just one or two multinationals. The amount over target suggests that at least an additional €1,000M “profits” were washed through Ireland. This of course happened with little or no employment gain!

We will see within a few months whether this is the month where things turned or is it just one more false dawn.

Monthly Figures
Table 1 Actual Projected

Cumulative Figures
Table 2 Actual Projected

May is now a crucial month with many of the largest Corporate tax payers due to make payments (those with 30th June & 30th November year ends), together with the March/April VAT returns. Assuming the big corporate payers come good, and some slight improvement in retail activity, the Government may exceed its target for the month of €3,253M. Income Tax for May should be well over the current month as April had 5 pay weeks for the weekly paid and 3 pay fortnights for all those fortnightly paid Civil Servants & Teachers. Indeed the May estimate for Income tax looks very low.

The Central Bank’s monthly statistics for March, available here, show signs of spending on credit cards levelling out and the March/April VAT returns due later this month, may see a slight upward movement. The problem is that core employment and economic activity remains anaemic. The cumulative effect of the next round of Government cuts and increases in lending rates will also act as a serious damper on activity.

It remains problematic whether the Government can reach its end of year targets. We may be close to the bottom, but there remain few signs of increased activity. Multi-national exports are unlikely to create many jobs. Any growth is unfortunately likely to be of the jobless variety.

Posted in: Fiscal policy

Tagged with: exchequer returns



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