Irish Tax Revenues Grow For First Time In Three Years

by Jason Gorringe, Tax-News.com, London

09 January 2012

Higher income tax and stamp duty revenues helped boost the Irish Exchequer's coffers in 2011, but overall receipts were still lower than originally projected.

Ireland's end-December 2011 Exchequer Returns show that, at EUR34bn (USD43.5bn), 2011's tax revenues were EUR2.3bn (7.2%) higher than in 2010. The Department of Finance attributes this year-on-year increase to income tax growth of 22% and a rise in stamp duty revenues of 45%. Total revenues were, nonetheless, EUR873m (2.5%) below the original Budget 2011 target of EUR34.9bn and were a little lower than the outturn as estimated in Budget 2012 in December.

Income tax revenues were bolstered by the introduction of the Universal Social Charge (USC) in January. The USC is charged on all gross income above a certain threshold, at staggered rates. Its implementation helped to bring in income tax revenue for 2011 of EUR13.8bn, a 22.4% improvement on 2010's figure of EUR11.3bn. However, income tax still came in below target, which had been set at EUR14.1bn for the year.

Also contributing to a year-on-year revenue gain was stamp duty. This was fuelled mainly by the introduction of a temporary levy on pension funds introduced to fund the Jobs Initiative. The levy imposes a 0.6% tax on all capital value assets under management of funded pension schemes and personal pension plans established in Ireland. The end-December target of EUR955m was comfortably beaten, with EUR1.4bn generated by stamp duties. A year-on-year change of 44.9% was recorded.

Continuing to cause problems for the Exchequer, however, are value-added tax (VAT) receipts. At end-December, EUR9.7bn had been generated by VAT, 4.8% short of the government's target of EUR10.2bn. VAT revenue was also 3.6% lower than in 2010, when EUR10.1bn in receipts was recorded. A 2% VAT hike became effective on January 1, 2012, taking the standard rate to 23%.

Corporation tax receipts showed a shortfall of EUR500m, at EUR3.5bn, and were down from the EUR3.9bn recorded in 2010. However, the Department of Finance has said that EUR261m in corporation tax receipts due for collection in December were not received into the Exchequer account in time to be accounted for in 2011. The bulk of these receipts have since been received and will form part of the January 2012 tax revenue outturn.

Commenting on the Returns, Finance Minister Michael Noonan and the Minister for Public Expenditure and Reform, Mr. Brendan Howlin, said: “We enter 2012 with our finances under control and this further underpins the credibility of our 2012 budgetary forecasts. The Exchequer deficit in 2011 was some EUR2.75bn lower than it was 2010, when the impact of banking related expenditure is excluded. This shows that we are making progress in returning our public finances to a more sustainable path. The 2011 figures are slightly ahead of estimates included in Budget 2012 and we have met our budgetary targets set as part of the EU/IMF Programme for 2011.”

Noonan added: “The tax receipts published today are broadly in line with the estimates for 2011 set out in the Budget in December and highlight the robustness and credibility of our 2012 tax revenue forecasts. After three years of falling receipts, tax revenues in 2011 grew by over 7%. This is to be welcomed although we cannot lose sight of the fact that tax revenues were somewhat less than originally planned. Tax revenues weakened somewhat in the second half of the year but this is not surprising given the more difficult economic conditions prevailing since the summer. Nonetheless there were some positive aspects to the tax revenue performance in 2011 and I am confident that the 2012 tax forecasts will be delivered”.

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