Wednesday, May 5, 2010

Tax Revenue Rises!

Following the trend from March, the Exchequer Returns for April show that the fall in tax revenue is continuing to ease.  In fact it is possible to suggest that tax revenue is rising! The Department of Finance has published the following documents for April:
In an Information Note to accompany the release the Department state that:
Tax receipts are on target to end-April 2010. Overall €9,005 million in tax receipts were collected by the end of April, against a target of €9,012 million. The end-April year-on-year decline is 10.8%, at end-March it was 15%.
I think this is understating what has happened in April.  Here is the pattern in cumulative tax revenues the Department are commenting on.
Tax Revenues to April The decrease on last year has eased for the past two months and we are now ‘only’ 10.8% behind the tax revenue collected last year.  
However, if we look at the actual annual change we see that in March revenues were €1,274 million behind last year while for April this decrease has fallen to €1,093 million.  This means that more tax was collected in April of this year than in April of last year.  The increase was actually €182 million or an increase of 11.5% for the month.  This follows equivalent decreases in the first three months of the year. Monthly Tax April The Department should be singing that tax is increasing but their monthly forecasts are proving ever more inaccurate.  After a few months of high forecasts the DoF forecast for April was 17% below the actual outturn as can be seen here.  Forecasts for the individual tax heads were even more erratic with corporation tax coming in over 250% ahead of target for the month!
The monthly forecasts may be wide of the mark but the cumulative forecast is virtually perfect with €9,005 billion collected versus a target of €9,012 million.  The Department are singing this one even if their forecasts for the individual taxes are also wide of the mark.
The 11.5%  jump in monthly revenue for April is not down to one or two tax heads.   If you look at the monthly revenues for the major tax heads here you can see that all except one were higher than the same month last year.  The only tax that is down is Capital Gains Tax and that only makes up 1.2% of this year’s tax take.  
Monthly Tax Revenues April The annual picture is still bleak, but a couple of more months like this should see things quickly improve.  Whether this will happen is hard to know.
It is still too early to declare the collapse in tax revenue over.  The monthly tax revenues are subject to many fluctuations.  Also April is the least important month for tax revenues in the year.  It is not a VAT return month and last year April accounted for less than 5% of the revenue collected.  The increase of €182 million can be attributed to the increases in VAT and Corporation Tax.  April is not a VAT return month and is usually not important for Corporation Tax so these increases could just be down to timing issues rather than indicative of any general upswing.
We will delay holding firm convictions on the stability of tax revenues until we see next month’s figures, which will include a VAT return with March-April VAT due by the 19th May, and will also provide a better indication of the amount of preliminary Corporation Tax being paid.

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