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Galway Independent

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So far so good

Wednesday, 17th May, 2017 1:00am

The Exchequer figures to the end of April continued the recent disappointing trend in terms of tax receipts since the start of the year. Overall, cumulative tax receipts were €344m lower than forecast and this is the second shortfall in two months. Despite this, there is some cause for optimism once the numbers are parsed.

Despite the continuing growth in employment, income tax receipts have risen by only 1.2% in the first four months of the year and are to date €198 million below what was budgeted. It is probable that this shortfall is due to the level of lower paid jobs within the new employment figures. The reduction in the USC rates in 2017 would also be a contributing factor. That saying, the bulk of the underperformance of the year thus far relates to the January/February figures so it is to be hoped that the March/April figures might signal the start of an upward trend.

Corporation tax receipts are also behind target which once more points to the difficulty in predicting these figures given the vagaries within the multinational sector on which these figures are so dependant. However, it is the latter part of the year in which the majority of these receipts are collected so the figures to date may not be representative of the year in total.

VAT continues to perform strongly and to the end of April has increased by 14.5% or €602 million when compared to the same period in 2016. This large increase indicates a rise in consumer spending which is representative of an increase in consumer confidence buoyed by the strong employment numbers.

The economy overall also looks like it will grow faster than had been expected in 2017. The rise in consumer spending and employment levels together with the positive data coming out of the manufacturing sector has led to the Department of Finance upgrading its economic forecast for the year to 4.3%. This rate of growth is in line with the European Commission’s own forecast which at 4% is one of the highest forecasted within the European Union.

The economic apocalypse that Brexit was supposed to usher in has not come to pass however the real impact of Brexit will only be felt in the long term as how the UK exits the EU plays out. Which, if the level of rancour that has characterised the opening exchanges is allowed to continue, could result in a disorderly exit for the UK - the worst case scenario for Ireland.

More pressing concerns to our national finances rests with our debt, when measured against our tax receipts, which remains at an unsustainable level as one of the largest in the EU and the disruption that may be caused once the public sector pay negotiations begin to take hold.

However, as it stands, the good ship Ireland continues to charter a steady course and shows no signs of being blown on to the rocks….yet.

HC Financial... We advise.

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