Yesterday’s release of the April Exchequer Returns shows that tax revenues are €1,307 million up on last year and €505 million ahead of “profile”. The most notable over-performance relative to profile can be seen for Corporation Tax which is €343 million ahead of the target for the end of April.
The monthly outcomes for Corporation Tax are:
The Exchequer tax profile was published in February so the January figure is the actual outturn which was known at the time. It can be seen that Corporation Tax revenues in January 2015 were 600 per cent greater than those received in January 2014.
The profiles are based on a budget day estimate from last October of revenues of €4,575 million. The actual amount collected in 2014 ended up being €4,614 million so the budget estimate was for a small reduction in Corporation Tax receipts (though the full-year revenues were obviously not known when the budget was published in October).
There can be many issues that affect Corporation Tax receipts and even if these became known since the budget, and particularly with the large increase seen in January, this would not be reflected in the tax profile which is the distribution of the budget day forecast over the year.
This issues aside the question remains: what explains the large increase in Corporation Tax receipts seen in the first four months of 2015? For the first four months 2015 Corporation Tax revenues are more than 100 per cent up on 2014 revenues and the expected profile. There could be:
- timing issues so this over-performance may be unwound later in the year.
- one-off payments from companies related to non-recurring items such as CGT which is paid under Corporation Tax by companies (excluding CGT on gains from development land).
- increased value-added in Ireland possibly related to things like contract manufacturing or, as suggested to me elsewhere, EU VAT changes.
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As I said on twitter, I can't see it being exceptional items like CGT as it is month on month. VAT B2C changes will impact. Ditto potentially UK DPT.
ReplyDeleteBut the April number makes me think there is something completely off about the forecasting & the only thing I can logically see resulting in the massive projected negative for April is a corresponding adjustment. Assuming some revenues were expected for April the negative has to exceed €20m suggesting €160m of profits at 12.5%. With Vestager doing a solo run yesterday suggesting to the European Parliament that CCCTB is necessary to prevent fiscal state aids, I can't see MNEs challenging a Revenue assertion that royalties out to Bermuda were excessive to avoid making a refund due to a corresponding adjustment.
The choice between Revenue not wanting to refund tax (and giving you some degree of comfort that in the event the D-G Competition came looking Revenue hadn't simply accepted your TP) and the D-G Competition looking for the ten year claw back based on their choice of TP method, not to mention the associated publicity...
With April the problem is obviously in the forecasts as well as or instead of the yields and corresponding adjustments are the only thing I can think of which could impact on that given how large a number we must be talking about.