Tommy Broughan (Dublin Bay North, Independent)
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5. To ask the Minister for Finance if he will report on the latest Exchequer returns, in particular those areas that are falling short of his Department's targets, such as VAT receipts and income tax receipts, including the universal social charge; and if he will make a statement on the matter. [34090/16]

Tommy Broughan (Dublin Bay North, Independent)
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I note from October's Exchequer returns that income tax is approximately €94 million, which is 0.6% below target, and VAT is €286 million, or 2.6% below target. Is the Minister concerned by these figures, given the fact that these taxes together comprise two thirds of revenue? Are we already beginning to see the impact of Brexit on domestic demand? Are the budget 2016 and budget 2017 figures beginning to unravel?

Michael Noonan (Limerick City, Fine Gael)
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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.

Tommy Broughan (Dublin Bay North, Independent)
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I am aware of the part that October plays in VAT in accounting terms. Given the fact that the Government is €300 million behind profile, is there any indication that cross-Border trade and the fall in sterling are affecting VAT returns? Are we already beginning to see the impact of Brexit?

In terms of income tax and USC returns, which are almost €100 million behind profile, two strong months will be needed in November and December. Given the grave uncertainties of Brexit and the Trump election, will the Government's 2016 budgetary projections be a close-run race? To some extent, the base figures for 2017 that were presented a few weeks ago are beginning to unravel. I believe it was Deputy Calleary who told the House this morning that the recommendation in the Garda dispute could cost €50 million. The Minister has conceded that. Are we beginning to see signs of a faltering economy and problems for the Minister's budgets?

Michael Noonan (Limerick City, Fine Gael)
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No, we are not. There are swings and roundabouts in every month's Exchequer returns. Some taxes are up, some are down. The taxes received by the Exchequer in the first ten months of the year are €613 million ahead of forecast. We made additional expenditure commitments during the summer, including approximately €500 million for health and some extra money for justice, flood damage, roads, the schools summer repair scheme and so on. The Christmas bonus, which was not provided for in the previous budget, is also a factor. We need a further €250 million to €300 million or so to pay for the extra expenditure committed, but we are confident that will happen in the last two months of the year. November is the month in which self-employed persons make their returns and corporation tax is finalised for most companies. We expect strong months in the time remaining. There are no signs of the decline that the Deputy suggested, but we are always watchful, which is especially the case in light of Brexit and various international events.

Tommy Broughan (Dublin Bay North, Independent)
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The Minister has committed to extra spending of approximately €550 million. However, does the apparent slow-down in revenue across a wide stretch of the tax base not mean that the Government's end-of-year figures will be tight if it wants to meet its deficit target? The base for budget 2017 may be significantly changed as a result of the hoped for settlements in the Garda and teacher disputes, the beginning of the plan to replace the Lansdowne Road agreement and pay restoration.

We are depending heavily on corporation tax, which was the subject of much discussion in the budget committee. Is the sustainability of this situation not a concern, given the question of tax inversions and the fact that the Government is beginning to implement the base erosion and profit shifting, BEPS, programme?

Michael Noonan (Limerick City, Fine Gael)
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I do not agree with the Deputy's analysis. Tax flows are strong at €630 million ahead of budget and the monthly forecasts provided by Revenue and the Department of Finance. We need a strong last two months to fulfil the commitments made on the expenditure side, but we expect to be in a position to do that. As to next year's base, approximately €2.5 billion in taxes will be collected in 2017 above what will have been collected this year.

On the question of corporation tax, the ongoing international reforms, which are driven by the OECD, are more likely to enhance the tax take in Ireland than reduce it. This has been the experience in 2015 and 2016.