The exchequer returns for the first quarter of the year, published on Monday, show that the public finances remain broadly on the course set on budget day last October. Tax receipts were relatively strong in March and for the first quarter they are ahead by 3.4 per cent, when once-off revenues relating to the Apple tax judgement are removed from last year’s figures. Spending is rising by over 6 per cent.
While March is an important month for taxes, the key period of the year still lies ahead, when the bulk of corporate tax is paid and full-year trends for other taxes become evident. For now, both income tax and VAT receipts remain encouraging –both up by 7.5 per cent or so in March.
Corporate tax receipts are running more or less in line with last year – this is of some interest, as companies with September year ends, such as Apple, would have made a preliminary payment last month. Overall, corporate taxes are holding in, but as yet there is no sign of a surge ahead of target. It remains to be seen whether the increase in the tax rate paid by big multinationals to 15 per cent is going to lead to a bigger haul.
The figures give the Government some leeway to respond further to higher energy costs. However, it needs to do so cautiously. The figures show that the cost of delivering services and of undertaking major investments is already leading to spending increasing well ahead of inflation. Slower growth due to higher energy costs is bound to have an impact on employment and spending, feeding through to taxes. In responding, the Government needs to focus its measures rather than taking a scattergun approach.
RM Block
Politically, this will not be easy, with Opposition demands for action and protests on the roads. But the unfortunate fact is that higher energy costs are an economic cost for Ireland and its people. The Government needs to protect those most at risk, but it cannot, as Ministers have warned, fully compensate households or businesses. The course of the war will determine the direction of this debate, but the cost of living and of doing business are again top of the political agenda.
