Tuesday, 13 December 2005
The expected surplus in tax revenues in 2005 was recently estimated at €1.8 billion or 4.8%. At the end of November total tax revenues were €36,879 million, which was €1,722 million or 4.9% ahead of profile. The receipts include €489 million from the main special investigations of the Revenue Commissioners, which was €294 million higher than expected for the period. Excluding the impact of these one-off receipts, taxes were 4.1% above profile.
The main excesses were on VAT, stamp duty, capital gains tax and excise. This is due to strong growth in the domestic economy and, in particular, in personal consumption expenditure, the volume growth in which is currently estimated at 5.3% for this year. The continued buoyancy of the property market is also a contributory factor in tax revenues being ahead of target. Income tax, excluding the impact of one-off receipts from Revenue's special investigations, was broadly on target, while corporation tax was close to €300 million below profile.
The methodology for forecasting tax revenues generally is based on forecasts of the level and composition of economic activity, which is determined by many factors and is subject to both national and international shocks. Forecasting economic activity, on which forecasts of tax revenues are largely based, is not, therefore, an exact science. Tax forecasts can also be influenced by factors and considerations other than the general level of economic activity.
One main reason we are receiving more in tax than we had forecast is that our tax and economic policies have put more money into the pockets of taxpayers who are spending and investing this extra money as they see fit. This extra spending and investment yields extra taxes.
How could the Minister get it so wrong? How could estimates for tax returns have been so far off target in recent years? In 2004, there was a projected rise of €1.6 billion in extra tax take but the actual tax take turned out to be €4 billion. The Minister was off target by 140%. The expected increase in 2005 was €1.8 billion and, as the Minister just mentioned, the actual figure will be approximately €3.7 billion. How did the Minister end up being 100% off target?
The Minister explained the formula he used to calculate the figure, which is obviously not working. He should go back to the drawing board. In 2003, it was forecast that capital taxes would fall by 23%, a figure of €604 million, but they rose by €1.2 billion.
In 2004, it was forecast that there would be an increase of €25 million in capital taxes but the actual increase was €1 billion. How far off target will the Minister's estimates for 2006 be? Will he revise them at this stage? This additional tax take is coming from families and businesses which are obviously paying more tax than they need to for this country to survive. The average tax take from a family has increased from €28,000 in 2002 to a projected figure of €37,500 for 2006. Given these overruns, it is obvious the Minister should be doing a better job and putting more tax back into the pockets of families.
I am glad to have this opportunity to deal with the bogus statistic that Fine Gael has been parroting for some time. It takes the total tax take, divides it by the number of households and then states that the burden of taxation has increased, which is nonsense. Every individual in the tax system has paid less tax in terms of average tax taken on income after this and previous budgets. Nobody in the tax system has lost out in this regard. Fine Gael's suggestion that everyone loses out flies in the face of reality.
Corporation, businesses and excise taxes, VAT, stamp duty and capital gains tax have all increased due to the level of economic activity. When one examines the components of growth, one can see that domestic demand has increased. A total of 90,000 more people are working, of which 71,000 hold full-time jobs. One would expect Fine Gael to welcome such a development. This is the litmus test of the success of our policies. If, on the basis of a total tax take of €36,000 million or €37,000 million, one's projections are off target by 2%, it is a relatively large figure. I will happily accept criticism from the Opposition over the fact that our economy is so successful that we have record numbers of people at work and more people providing greater tax revenues for the Exchequer, on the basis of a reduced average tax take for workers.
The Minister appears to forget that, when someone fills his or her car with €40 of petrol, he or she is making a present of €25 to the Minister. These are real people with real families and real households. He forgets that when a person buys a new car costing €22,000, he or she makes a present of €8,500 to the Minister. He also forgets that when a young couple buys a house costing €300,000, they make a present of €100,000 to the Minister.
These are real people and real families paying real taxes. Business people who pay tax also belong to households and families. The number of households is increasing substantially. I acknowledge and welcome the fact the number of people at work is also increasing. However, there has been a gross underestimate of the tax take in recent years. This estimate should be closer to the actual figure and, in that context, the extra tax could be passed on to families, individuals and households, rather wasted.
A figure of €900 million was returned to taxpayers. What part of this does Deputy Paul McGrath object to? A figure of €1.12 billion went to recipients of social welfare payments. What part of this money was wasted?
Fine Gael should wake up and smell the roses. It is living in one of the most successful economies in the world. The Opposition cannot stand the fact that our policies are working. It is driving them nuts.