An Saoi: Today’s tax figures were a shock, even to me. Perhaps I shouldn’t have been so surprised as the Central Bank’s report for December had already told us that spending on credit cards was over 14% below the 2008 level. This is reflected in the nearly 18% decline in VAT. As taxes are paid in arrears, these figures give us a snapshot of the economy to December and do not reflect activity in January.
All through December we were fed a bunch of misrepresentations by the Irish media, which was so succinctly described by David McWilliams in last Sunday’s Business Post. Newspapers & RTÉ happily talked up an economy, which we now see is still in tatters.
Looking at the detailed figures, we see a consistent pattern of decline. On the consumption side, Customs duties down 17%, Excise down 16% & VAT down 18%. On the taxes on income side, the year on year decline in Income Tax of just 10% was helped by the Income Levy. The cuts in Public Sector pay will feed into considerably lower tax payments from next month. The 66% decline in Corporation Tax may be down to pre Christmas refunds and it is hard to draw any conclusions from it. Next month’s figures are far more important. The fall away of CAT is not surprising given the state of the housing market. The declines in Stamp Duties and CGT are slightly surprising as they had been quite good in December. I mentioned last month that the introduction in E-Stamping by the Revenue had perhaps energised many solicitors into getting their affairs in order.
However there remain two imponderables, which may have made a material difference to this month’s figures.
1. We have no idea as to the levels of unpaid taxes and by how much they are increasing each month.
2. There is no summary of outstanding repayments. Delaying or expediting large repayments from month may affect the monthly outcome. This is particularly true for VAT return months such as January.
Delaying repayments may partially explain the better than expected figures in December. However this is a very dangerous game as anyone who has juggled paying their bills and credit cards knows.
The figures suggest that the Government will struggle to achieve their very modest targets, which it should be noted are below those of 2003. February will tell us far more about the state of the economy. The Government published their 2010 Tax Profile today and are expecting February 2010 to come in at €1,726M, €298M below Feb. 2009.
Within the global figure, they are expecting Income Tax to come in close to 2009 figure, €891M against €915M, which seems very optimistic. Corporation Tax is expected to come in at just €90M against €290M last year. This is partly down to the change in preliminary tax rules, but there must be some big losses also expected from companies with a 31st March accounts year. It is not a VAT return month with just VAT collected by Direct Debit and on imports due. A bounce is expected in Excise, which includes VRT increasing from €310M in 2009 to €344M this month. Time will only tell. I will make my estimate of the end of year outturn after the March figures, but it is hard at this stage seeing the figures break €30,000M by year-end.