Fianna Fáil Finance Spokesperson Michael McGrath has said the Government must explain the unexpected shortfall in income tax and corporation tax for the first four months of the year ahead of the publication next month of the Summer Economic Statement which will update the estimate of available fiscal space for Budget 2018.
Deputy McGrath added “The €344m shortfall in tax receipts for the first four months of the year is certainly a concern as preparations for Budget 2018 step up a gear.
“The fact that income tax is almost €200m or 3.1% behind expectations with one third of the year gone must be explained, particularly in light of the ongoing improvement in the unemployment numbers.
“40% of the forecast €50.6 billion total tax take this year is expected to come from income tax and it is by some distance the largest source of taxation for the economy.
“We cannot afford any further slippage in receipts from income tax. For this reason, we need to know why income receipts are not improving in line with the number of people at work.
“Equally, the €223m or 28% shortfall in corporation tax is concerning. The Government is forecasting that €7.7 billion of corporation tax will be received in 2017 – 15% of our total tax take.
“However, we are heavily dependent on corporation tax receipts from a small number of large multinationals with the top ten companies paying in the region of 40% of all corporation tax.
“While corporation tax receipts are skewed towards the back end of the year, it is worrying to see such a weak performance in the first four months of the year. The long term sustainability of being so dependent on receipts from such a small number of companies must be examined by the Government.
“The most recent estimate of fiscal space for Budget 2018 was published with the last Budget in October. The estimated fiscal space of €1.2 billion has already been more than halved as a result of the carry forward effects of Budget 2017 and we will learn the latest estimate next month in the Summer Economic Statement.
“The Government will have to consider, and plan for, the possible scenario of weaker than expected exchequer returns continuing over the course of 2017.
“Whatever resources are available for Budget 2018, it is vital that the Government chooses wisely. In framing the Budget, the single most important consideration has to be to prepare our economy as best we can for the still unknown effects of BREXIT,” concluded McGrath.