Thursday, 18 May 2017
Department of Finance
79. To ask the Minister for Finance the reason for taxes which his Department has identified as being behind profile in view of the failure of the recent Exchequer returns to meet profile as set out in budget 2017; and if he will make a statement on the matter. [23621/17]
The following table below provides a breakdown of the various tax-heads performance at end-April 2017 against published profile.
|Tax-head||End-April 2017 Outturn €m||End-April 2017 Target €m||Excess/Shortfall €m||Excess/Shortfall %|
|Income Tax (Including USC)||6,179||6,378||-198||-3.1|
|Capital Gains Tax||106||105||1||0.7|
|Capital Acquisition Tax||58||60||-2||-4.0|
|Local Property Tax||253||248||6||2.3|
The position is that cumulative Exchequer tax revenues at the end of April 2017 were slightly below profile, coming in just 2.4% or €344 million under expectations. In terms of the “Big 4” tax heads, corporation tax, income tax and excise duties recorded shortfalls against profile, while VAT was ahead of target.
Corporation tax receipts of €587 million were collected to end-April. As a result, cumulative revenues were down 27.6% or €223 million against target. It is important to point out that Exchequer receipts from corporation tax can vary throughout the year and just over 10% of the total annual receipts was expected in the first four months. By comparison, over 60% of corporation tax receipts are expected during May, June and November. Due to the non-linear nature of corporation tax receipts, the potential for company-specific factors and the low proportion of the annual receipts received to date, it would be premature to draw any conclusions about corporate tax at this stage of the year.
Income tax receipts to the end of April were 3.1% or €198 million below profile. It is important to point out that income tax encompasses a broad range of elements, some of which are not directly impacted by employment or wage developments. These include Deposit Interest Retention Tax, Life Assurance Exit Tax, Dividend Withholding Tax, Professional Services Withholding Tax and Back Duty. These payments, by their nature, can be non-linear and timing can vary from year to year. I am informed by the Revenue Commissioners that the majority of these specific components are having a drag on overall income tax receipts in the first four months of 2017.
Notwithstanding this, the performance of USC is lower-than-expected, and my Department is currently reviewing its performance, in conjunction with the Revenue Commissioners. The initial indications are that the Revenue Commissioners are satisfied that the overall estimate of the Budget 2017 package in respect of USC changes was costed accurately at €335 million.
At the time of Budget 2017, the apportionment of the total USC package between PAYE and Schedule D was expected to be €263 million and €72 million respectively, in line with previous norms. However, subsequent analysis by Revenue, indicates that the allocation of the USC package between PAYE and Schedule D should have been €311 million and €24 million respectively, due to the dynamics of the USC package. While, this helps to explain the current under-performance against profile for USC paid by PAYE taxpayers, it is important to point out that this reapportionment should have no adverse impact on the overall collection of USC receipts as this should equalize later in the year, when self-employed returns are made.
Furthermore, as part of the continuous efforts to improve the Department’s tax forecasting performance, the ESRI and my Department jointly examined the sensitivity of income tax and USC revenues to changes in income. As a result of this work which was published in March 2017, the Department has revised the income tax and USC revenue elasticities used in the forecasting process. This will affect these forecasts from 2018 onwards.
Significantly, the Revenue Commissioners have also informed me that PAYE, the most important component of overall income tax, has closed the first third of the year, broadly in-line with profile, and is up 7.9% year-on-year, which is consistent with the improving labour market.
Receipts from Excise duties amounted to €1,740 million in the first four months of the year and were 6.3% or €117 million below profile. The under-performance is evident across a broad range of excise components, while others such as vehicle registration tax remains in line with profile for the year to date.
In relation to Stamp duties, receipts of €290 million were collected to end-April 2017, which represents a 21.2% or €78 million shortfall against target. The under-performance in the year-to-date, is primarily due to property and shares transactions. However, it is important to point out that while both components are currently below target, they are up in year-on-year terms.
With regards to other minor taxes, these are generally broadly in line with profile. Finally, my Department along with the Revenue Commissioners will continue to examine these tax-heads and consider all relevant developments.