DUBLIN (Reuters) - Ireland had collected just 0.6 percent less tax than expected at the end of September, the finance ministry said on Tuesday, raising confidence that a shortfall that was as high as 2.4 percent in April will be eliminated by year end.
Ireland has consistently beaten its revenue targets in recent years as fast economic growth boosted the state’s tax take, but receipts had lagged in the early part of this year.
The gap closed to 0.8 percent in July and 0.7 percent in August before narrowing again in September, one of the busiest tax months of the year.
Anecdotal evidence suggests the shortfall will be fully recovered when self employed tax returns are filed in November, principal officer at the finance ministry, John Palmer, told a news conference on Tuesday.
Finance Minister Paschal Donohoe said in a statement that the government was on track to meet its fiscal targets for the year, which Palmer said would translate into a budget deficit of 0.4 percent of gross domestic product as forecast.
Income tax and excise duties remained below target at the end of September, while VAT also slipped below forecast but corporate tax receipts, which have soared in recent years, came in 3.8 percent ahead of expectation.
Overall, tax revenues were 5.4 percent or 1.8 billion euros up year-on-year. Government spending, which came in 0.8 percent below target, rose by a similar amount
The government recorded a surplus of 2.4 billion euros for the first nine months of the year versus a 25 million euro deficit a year ago, primarily due to June’s 3.4 billion euro sale of a stake in state-owned Allied Irish Banks ALBK.I.
Ireland aims to balance its budget for the first time in a decade next year but until it does, Donohoe has limited room to increase spending and cut taxes. The officials confirmed that there would be no more than the 350 million euros already flagged available for such changes in the 2018 budget next week.
“While the Minister normally manages to spring a rabbit out of the hat on budget day, the above does not augur well in terms of any surprise tax cuts next Tuesday,” said Peter Vale, tax partner at Grant Thornton.
“It looks more likely that very modest tax cuts will be the order of the day, with middle income earners the biggest beneficiaries.”
Reporting by Conor Humphries; Editing by Catherine Evans