Mr. Seamus Coffey:

The performance of income tax during 2017 is something on which we have been keeping a reasonably close eye. It is not necessarily that income tax has not been hugely tracking the performance in the labour market but that, perhaps, it has been falling short of expectations. There may be an issue with the forecast for income tax that has been generated in the past couple of years. A number of reasons have been put forward as to why income tax has been falling short of expectations, primarily related to the large number of changes – almost €2 billion of changes were introduced as revenue-reducing measures against the USC in the past couple of years. It does appear that there has been an underestimation of the impact of those changes and that they led to a greater revenue reduction than was anticipated. That has been corrected for 2018. As a result, the forecast from 2018 onward should not have that underestimation of the revenue measures as part of them.

A second reason put forward is that there was a misallocation between the impact of the revenue-reducing measures between the self-employed and PAYE workers. It was expected that the November receipts, which we have just seen, would see a rebalancing and that the shortfall that had been seen up to October would in some sense be corrected in November. That did not happen, however. In fact, the receipts fell even further behind in November and are now €250 million behind where they were expected to be. They are still up in year-on-year terms and growing by more than 4% but they are not growing as fast as was expected. There are various issues being looked at that seek to explain it. We do not think it is necessarily reflective of developments in the labour market because we have been tracking PRSI receipts, which equally are substantial and which are linked to the labour market. Those receipts are growing at a rate of 7%. They are more reflective of the increase in employment number and the increase in pay we are seeing in the economy. PRSI is not really affected by budgetary measures. There has been a divergence in recent years. PRSI receipts are ahead of expectations. They are close to €200 million ahead of what was expected by the end of November. We have been keeping a close eye on income tax and the rebalancing that was expected in November. Perhaps there was a belief that there were more self-employed people registering with Revenue or in the economy. At this stage, it is not being reflected in the figures but it could be that we would not see those returns until next year because the 2017 self-assessed tax returns will not be filed until next year.