Exchequer takes in highest ever level of tax

Deficit €430m lower than government had forecast

Exchequer, tax take, November, economy, borrowing, Michael Noonan

Michael Noonan | Image: RollingNews.ie

The exchequer took in more tax than ever before in 2016 as the government collected nearly €48bn in tax.

The tax intake was 5% higher than in 2015 - and 1.4% higher than had been projected at €47.9bn.

The state still ran a deficit of just over €1bn - which has widened out from €64m in 2015.

However the Department of Finance said the higher deficit figure was partly caused by reduced bailout repayments coming in from banks.

When the reduced repayments are factored in to the figures, the shortfall was €864m lower than it was in 2015.

However, the country had to pay out just over €6.8bn on interest and servicing costs for the national debt - down from €7.1bn last year.

The deficit was €445m below the level the Minister for Finance Michael Noonan targeted when he unveiled the 2017 Budget in October.

“Our citizens deserve quality public services to help develop a fairer Ireland,” said Minister Noonan. “The amount of tax collected in 2016 is at an historic high.”

“It has provided not only for the extra expenditure incurred in 2016 but for the substantial tax reductions announced in the Budget in October 2015 and delivered during the course of 2016.” 

Income tax receipts rose by 4.4% to €19.2bn last year beating the department’s projections by 0.9%.

VAT intake was 3.4% (or €440m) less than the government was hoping for - however it still rose by 4% on 2015 to €12.4bn.

John Palmer from the Department of Finance said it is still too early to say whether the shortfall is the result of cross border shopping as a result of the exchange rate with sterling:

"There are the anecdotal stories of people going across the border and online shopping," he said. "But against that if you look at excise alcohol, which is normally one of the products for cross border shopping, has held up really well and is up in year on year terms and ahead of profile."

Mr Palmer said the tax performance for the month of December in particular was disappointing:

“The tax performance for the month was a little bit disappointing coming about €150m below profile and a key contributor to this was a large corporation tax repayment of about €150m,” he said.

“Gross voted expenditure, which had been well below profile at the end of November, caught up in December.”

Corporation tax was the stand-out performer - with receipts 7% ahead of last year and well ahead of forecast.

Peter Vale, tax partner at Grant Thornton said the tax receipts are healthy overall and suggest the Exchequer is in a strong position heading into 2017.

“Probably the best news for the government is that the strong corporation tax receipts look sustainable, providing a buffer against any Brexit related dip in tax receipts elsewhere,” he said.

“Income tax receipts also grew strongly over the previous year, reflecting both more numbers at work and higher wages.