Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

The end of October 2016 saw the Exchequer record a deficit of €2.429 billion compared with a deficit of €2.184 billion in the same period last year. The €245 million increase in the deficit is driven by an increase in Voted expenditure, an expected reduction in non-tax revenue and a decline in banking-related receipts relative to the same period last year. All of these are partially offset by increased tax receipts.

At the end of October, cumulative tax revenue of €36.7 billion had been collected. This is 1.7%, or €613 million, ahead of target and up 4.7%, or €1.651 billion, on the same period last year. Corporation tax and excise duties are ahead of profile while VAT and income tax are slightly behind profile.

Income tax receipts at the end of October were broadly in line with profile, down just 0.6%, or €94 million, against target. However, receipts were €577 million, or 4.2%, higher in year-on-year terms. This slight underperformance against profile is due to a combination of weak DIRT receipts and an underperformance in the PAYE element of USC. Reflecting lower-than-expected interest rates, 2016 DIRT receipts are approximately €130 million below profile, which is larger than the amount of underperformance in income tax in the year to date.

The PAYE element of USC is approximately €195 million, or 7%, below profile. This is due to a combination of factors. First, the final USC yield for 2015 was almost €100 million lower than expected at the time of budget 2016, meaning that the base for the 2016 forecast yield was too high. Second, the Revenue Commissioners updated their method of estimating the first and full year costs of new tax measures with effect from July 2016. An analysis of the first year and full year apportionment of costs was undertaken to ensure the estimated distribution was as accurate as possible. As a result, more costs-yields of new income tax measures are now attributed to the first year, which results in a consequential lower carryover cost in the second year. While the full year costs of the USC tax measures introduced in budget 2016 did not change, an increased allocation of that cost to first year means that more of the costs are being incurred in 2016 than was previously estimated.

Additional information not given on the floor of the House

As the final DIRT due month has now passed, it should have no further effect on income tax receipts. Given the relative predictability of PAYE receipts, the key open question relates to receipts from the self-employed sector. November is the most important month for these and a strong performance should ensure that the overall income tax target for the year will be achieved.

While VAT receipts are up nearly €475 million in year-on-year terms, they are running approximately €285 million, or 2.6%, below profile. This is primarily due to the fact that, while retail sales have been strong in the year, with retail volumes up 3.8 % year-on-year, the 1.9% increase in the value of retail sales, the base upon which VAT is driven, is much more modest, reflecting the fact that there is little inflation in the economy.

Regarding the smaller taxes, stamp duties are behind profile while the capital taxes are ahead. The tax revenue performance has been solid through the first ten months of the year and we are currently on track to achieve the overall tax revenue target of €48.1 billion set out in budget 2017.

See this speech in context