By Padraic Halpin
DUBLIN (Reuters) – Ireland’s tax take was just 0.5% behind target for 2019 at the midway point of the year, the finance department said on Tuesday, an improvement on a month ago as an underperformance in corporate tax receipts was mostly reversed.
After five successive years as the European Union’s fastest growing economy, Ireland estimates it will collect 5.2 percent – or 2.9 billion euros (2.6 billion pounds) – more tax in another record haul this year, but had fallen 1.1% below expectations at the end of May.
That was mainly due to corporate tax coming in 11.4% behind target following the third-busiest month for company returns.
A bumper June, the second busiest month behind November and the first one primarily determined by 2019 corporate profitability, cut that deficit to 1.4%.
Corporate tax receipts, mainly from Ireland’s large cluster of multinational firms, have more than doubled in recent years and rarely come close to forecast. Finance department officials said Ireland’s tax collectors felt this year’s target was “eminently achievable”, based on feedback from large firms.
Government spending was also within target, including in the health service, whose persistent failure to stick to its annual allocation has swallowed up most of the corporate tax windfall and led to a reprimand from the state’s fiscal watchdog.
That contrasted sharply with a year ago when the largest government department had already spent its budgeted increase for the year, said John Kinnane, principal officer for the department of expenditure.
It has used up 650 million euros of its 1.1. billion euro 2019 budgeted increase so far this year.
The positive outturn helped Ireland run a 260 million euro budget surplus for the first half of the year, putting the government broadly on course to meet its target of running a surplus of 600 million euros or 0.2% of gross domestic product (GDP), said Davy Stockbrokers chief economist Conall MacCoille.
Last year’s 100 million euro surplus was the first time in a decade that Ireland spent less than it took in in revenue, although Finance Minister Paschal Donohoe warned last week that public finances would return to a deficit of up to 1.5% of GDP next year if Britain left the European Union without a deal.
Donohoe’s current remaining budget 2020 package of 700 million euros – which he may have to partly reserve for sectors impacted by a no-deal Brexit – could rise to as much as 1.5 billion euros based on Tuesday’s figures, according to KBC Ireland chief economist Austin Hughes.
(Reporting by Padraic Halpin; Editing by Mark Heinrich)