Paul Connaughton
Question:111 Mr. Connaughton asked the Minister for Finance the reason his forecasts for income tax revenue have been so wide of the mark. [14406/02]
Written Answers. - Tax Yield.
Income tax receipts into the Exchequer up to 31 May 2002 totalled €4,110 million, representing a reduction of 14.7% on the same period in 2001. The budget day target for 2002 as a whole is for an increase of 1.1% over the 2001 outturn. The variation between the two rates of change can be misinterpreted as there are a number of timing factors affecting income tax receipts in 2002.
The change to a calendar year means that the first five months of 2002 have had to absorb the changes from both budget 2001 and budget 2002. In addition to this, payments into the SSIA accounts did not commence until June 2001. This means that income tax receipts in the January to May 2002 period have been reduced by the SSIA payments in those months whereas the same period in 2001 had no similar reduction.
There is also a substantial effect from the performance of the economy in each period. Income tax receipts in 2001 weakened significantly in the latter half of that year due to declining economic conditions. This is clearly demonstrated by the fact that income tax receipts in the first five months of last year were 9.3% up on the previous year while receipts in the remainder of the year recorded a reduction of 2.1%.
The combined effects of these timing factors is to reduce the rate of change of income tax receipts in the earlier part of this year. However, as the year progresses the economy recovers and these factors unwind, the rate of change of receipts should increase.