Tax revenues in the first quarter of 2012 were €809 million (10.2%) ahead of forecast. Boosted by the 2% increase in the standard rate of VAT and the USC, total tax receipts to March 2012 (‘end-March’) were €8,722 million, some €1,216 million (16.2%) up on the same period in 2011.

In contrast to the trend in VAT receipts during 2011, receipts to end-March were just over €100 million ahead of target and 5.8% up on the same period in 2011. This is the first indicator of the impact of the 2% standard VAT rate increase brought in as part of Budget 2012, as receipts in March relate to January/February activity.

However, there are two key factors which must be borne in mind when considering tax receipts to end-March; the late payment of approx. €250m in Corporation Tax and the reclassification of receipts from employers previously returned as PRSI.

As previously reported, included in the corporation tax receipts is approximately €250 million in receipts that were originally expected in December 2011 but were received into the Exchequer in January 2012. However, according to Exchequer statements, corporation tax was still ahead of target at end-March, even after allowance is made for this factor. A contributory factor is a lower than expected level of repayments to companies, although it is expected that some of these repayments will be made in the coming months with a consequential negative impact on collection in those months as a result.

Income tax was up €739 million (25.8%) in the same period in 2011 and €321 million (9.8%) ahead of target at end-March. As advised in a February issue of Chartered Accountants Tax News, a large part of this over performance compared to profile is the result of a technical reclassification of receipts from employers which they had previously returned as PRSI. However, according to Exchequer statements, even after adjusting for this reclassification it is estimated that income tax was still around 3.5% ahead of target at end-March.

The analysis of end-March tax receipts is published on the Department of Finance website at http://www.finance.gov.ie/viewdoc.asp?DocID=7201&CatID=5&StartDate=1+January+2012