Irish VAT misses its taget and creates uncertainty

It remains unclear why the tax came in under its forecast rate during the first half of the year...

Irish VAT misses its taget and creates uncertainty

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Ireland has generated strong half year exchequer returns but concerns are growing over consumer taxes.

It was confirmed yesterday that most categories of tax receipts continued to perform well with the half year Exchequer Returns showing overall tax returns nearly €750m ahead of target.

Income tax is on target in the current year and more than 5% ahead of 2015; corporation taxes continue to surge and are another 19% ahead of target and excise receipts, driven by higher car sales, are close to 15% ahead of expectations

But VAT continues to lag and at the half-year stage is €230m or 3.6% below target.

As the tax is declared every two months, senior Department of Finance officials suggest timing issues as one possible reason for the shortfall but seem pretty perplexed by the outcome. At a press event yesterday they did acknowledge that VAT receipts could be impacted further by renewed cross-border shopping in the second half of the year if sterling remains weaker.

Peter Vale, tax partner at Grant Thornton who Vincent Wall talked to on Breakfast Business echoed this concern.

He referred to the VAT return as the "one note of caution," in the figures - adding that he believed that the increase in corporation tax payments is sustainable.

Mr Vale said that it will be late September before the country gets a clearer picture as to what the full-year VAT return will look like - but this is dangerously close to the budget in September.