Thursday, 6 May 2010

April figures

An Saoi: I said last month that April is a boring tax month with little happening. I had half intended skipping over making any comments but these figures are intriguing. They clearly show something is happening in the economy. What exactly it is, I am not sure.

The increase in Customs duties is massive and if it continues over the next few months will be a clear sign of increased activity in the economy. The increase in Excise maybe mainly down to the increase in car sales but currency movements and the decline in duty on alcohol may also be influencing the figures. Again this is a sign of increased stabilising or increased activity. The almost complete collapse in Capital Gains Tax reflects little or no activity in the disposal of assets. What little activity there is may be arising from forced sales, where any gain is being offset against existing losses.

The increase in CAT may be a product of the drop in CAT thresholds last year and also increased Revenue audit activity in the area. A small number of settlements would be enough to increase the yield significantly. The lack of any movement in stamp duty suggests that there is little movement in the property market. Income tax has stabilised at a very low level, despite the huge personal tax increases by way of the levies. Planned Public Sector job cuts and continued reduction in spending may see Income Tax falling again from summer onwards because there is little sign of the private sector hiring. The VAT increase is I assume from the same source as the Customs duties, on imports from the outside the EU (VAT at point of entry still applies)

Corporation Tax is up significantly, but this maybe down to just one or two multinationals. The amount over target suggests that at least an additional €1,000M “profits” were washed through Ireland. This of course happened with little or no employment gain!

We will see within a few months whether this is the month where things turned or is it just one more false dawn.

Monthly Figures
Table 1                                                                      Actual               Projected

Cumulative Figures
Table 2                                                                        Actual           Projected

May is now a crucial month with many of the largest Corporate tax payers due to make payments (those with 30th June & 30th November year ends), together with the March/April VAT returns. Assuming the big corporate payers come good, and some slight improvement in retail activity, the Government may exceed its target for the month of €3,253M. Income Tax for May should be well over the current month as April had 5 pay weeks for the weekly paid and 3 pay fortnights for all those fortnightly paid Civil Servants & Teachers. Indeed the May estimate for Income tax looks very low.

The Central Bank’s monthly statistics for March, available here, show signs of spending on credit cards levelling out and the March/April VAT returns due later this month, may see a slight upward movement. The problem is that core employment and economic activity remains anaemic. The cumulative effect of the next round of Government cuts and increases in lending rates will also act as a serious damper on activity.

It remains problematic whether the Government can reach its end of year targets. We may be close to the bottom, but there remain few signs of increased activity. Multi-national exports are unlikely to create many jobs. Any growth is unfortunately likely to be of the jobless variety.

1 comment:

Anonymous said...

Neo-Liberalism, and the Greek tragedy.

May 6, 2010 by

Neo-liberalism, and the Greek tragedy.

The country that gave the world the three most important tragedians, Aeschylus, Sophocles and Euripides is facing a major economic tragedy. While economists the world over have differing views on the root cause of Greece’s economic problem, as a non economist, I have been immensely concerned with anarcho-capitalism, (an economic system that destroys government regulation of the economy, and creates economic anarchy within the global economic system).

The conscious deregulation of the economy that started during the Reagan administration in the U.S. reached its climax during President George W. Bush’s tenure and has brought the global economic chaos the world is in at the moment. Their bankrupt economic theory of the market policing itself, has proven to be as hollow as their dreams of making trillions of dollars without manufacturing anything. (Capitalism without ethics, June, 2009 PSS.WP).

Sadly, Greek is another glaring example of the failure of neo-liberalism. Developing countries beware neo-liberalism is here to destroy you, not to save you. And those politicians that still praise the virtues of neo-liberalism, as Ashley St.Claire would say, they are either dim-witted or have a personal agenda that would personally benefit them at the expense of the interest of their countries.

Neo-liberalism is what Susan Strange calls “Casino Capitalism”. She is one of the first to have for seen the dangers of anarcho-capitalism. She has linked “casino-capitalism”, in to a number of trends among which are: government’s deregulation of the economy, (based on the fallacy that, the market and the banks would regulate themselves), and commercial banks turning in to investment banks. Susan Strange’s work is an essential contribution in de bunking the dominant doctrine of neo-liberalism.

Recently, the EU and the IMF have agreed to extend $147 billion dollars rescue under a three year agreement. This “rescue” plan actually is intended to rescue French and German banks that are holding a large share of Greece’s bonds. Moreover, the “rescue” is meant to temporarily stop a widening debt crisis in Europe which might include Portugal, Spain and Italy. In all this, the Greeks will be burdened with more debt, and are required to take harsh budget cuts.

In order to comply with the EU and IMF’s “rescue” plan, the Greek government will cut public-sector workers’ pay by 20%, raise the retirement age, increase sales tax to 23%, increase the price of tobacco products, alcohol and gas by 10%, increase taxes on property and businesses, etc. etc. Even if all this drastic measures are instituted according to plan, the actions taken actually would increase Greece’s debt and shrink its economy by 4%. How about a big applause to neo-liberalism?

Focusing only on dollars and cents, what usually is left out is any discussion of the impact of neo-liberalism’s creation of political instabilities around the globe. The main crime of neo-liberalism is its unparalleled focus on greed some would say debauchery and social injustice.

I only hope, the violence in Greece would quickly recede before it destroys a country that is the root of European civilization.

Professor Mekonen Haddis.