Tax revenues 1.7% ahead of target in year to August

From the Irish Times



Robbing Peter to pay Paul?

deficit down but…

Anyone know what the change is excluding bank recaps?

The higher VAT rate was increased by 10% in the last budget so it’s probable that that trend won’t continue.

Would the increase not be included in the budgeted revenues for 2012.

Perhaps activity is up relative to budgeted levels :slight_smile:

What are you talking about?

The higher VAT rate was increased at the last budget from 21% to 23%. That is a 10% increase in that VAT rate. The government is unlikely to increase that VAT rate again so any increase in VAT receipts will have to come from economic activity. That is the point I made. Nothing else.

The increase is against the expected VAT receipts which should include the planned increase in the rate.

I am presuming YOY is 21% vs 23% or has it been adjusted somehow?

These figures are negligible and not a sign of growth so from that are alarming as they are reaching if not have reached the limits of credible TAX policy. So that’s it. No where else to go, unless it’s first borns TAX i.e. An emigration TAX. :angry:

The 3.1% increase is in the actual year on year figures. Much of that can be accounted for in the 10% increase in the higher rate.

In fact, if the rate of VAT is up 10%, but receipts are only up 3%, then that indicates that the underlying activity is down, not up.

What we’re saying is: (Activity2011)(0.21)(1.03)=(Activity2012)(0.23)
therefore (Activity2012)=0.940(Activity2011)

or a 6% drop (if my sums are correct).

Of course, this ignores how money moves between different VAT categories (e.g. more spent on foods lowers VAT, etc.,) but I don’t see any good news in this. Rather, it could be a sign that either:

  • Activity is sliding, and only the increase in VAT rates has masked/stabilised the effect of this on VAT receipts
  • The increase in VAT has had a negative effect on activity

As noted already, the change in VAT rate will have been factored in to the projections. The fact that these results are ahead of projections only really tells us about the people making projections and the assumptions they made, it’s not really a good-news/bad-news story for the economy. Furthermore, as also noted already, the effect of the VAT rate change in the actual receipts is a short-term one (step-change). However, the error in projection can be very persistent (as we saw through both boom and bust looking at projections from the goons at DoF and CB).