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Gaping hole emerges in Exchequer returns!


kerrynorth

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Something that was not highlighted in the Dept. of Finance's January exchequer statement is that Income tax returns for the month are running at 12% below departmental expectations. In fact less was taken in Income tax this January as against January 2006. The budget reductions will not kick in until about March so this cannot be the explaination. E1.107billion was taken in this January as against E1.116billion last year and the departmental monthly profiling expected E1.27billion this January.

This massive as yet unexplaned gap in Income tax was more than compensated for by big increases in VAT, Stamp Duties and Corporation Tax therefore masking this gaping hole. However, seeing as the Income tax returns are a bell weather for employment it does point to some potential issues. Now, one month's figures do not neccessarily need raise alarm, but if this trend persists into the first quarter then it may point to employment problems.

If there are employment problems in the private sector then this may as yet not show up in unemployment stats as you can need to be unemployed for upto 9 weeks to claim benefits and many may be non-nationals whom are not entitled to benefits.

I am just pointing out something that needs to be watched in the next couple of months that may point to the economy not being as robust as we are all led to believe!
 

rockofcashel

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might that be related to the 12% drop in house building starts in January ?
 
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Could the changes in tax rate/bands/personal allowances not contribute to this as per last budget??

It's not the only aspect of govt economic policy we need to worry about though is it? With "falling" house prices, stamp duty and vat are bound to be hit in coming months. Could this slow down come to a sudden stop just ahead of polling day?
 

rockofcashel

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Jonathan_Rainey_FG said:
Could the changes in tax rate/bands/personal allowances not contribute to this as per last budget??

It's not the only aspect of govt economic policy we need to worry about though is it? With "falling" house prices, stamp duty and vat are bound to be hit in coming months. Could this slow down come to a sudden stop just ahead of polling day?
If FG are lucky .. worst case scenario for FG, is winning an election, and having all this fall into your lap late in the year .. you'll be blamed for killing the Celtic Tiger, and will never be elected again
 

kerrynorth

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rockofcashel said:
might that be related to the 12% drop in house building starts in January ?
Seeing as the Consturction sector is such a large and unbalanced element to the economy, yes, this would partially explain some of it, maybe 15-20% of the difference, but not the remaining 80-85%!

For illustrative purposes the Income Tax returns for Jan 2005 and Jan 2006 rose from E945million to E1.116billion, yet fell back to E1.107billion this January!
 

Rocky

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rockofcashel said:
Jonathan_Rainey_FG said:
Could the changes in tax rate/bands/personal allowances not contribute to this as per last budget??

It's not the only aspect of govt economic policy we need to worry about though is it? With "falling" house prices, stamp duty and vat are bound to be hit in coming months. Could this slow down come to a sudden stop just ahead of polling day?
If FG are lucky .. worst case scenario for FG, is winning an election, and having all this fall into your lap late in the year .. you'll be blamed for killing the Celtic Tiger, and will never be elected again
I can see that happening a mile away. FG will get into a government and day later the economy will collapse, we wouldn't have even done anything yet and we'll be blamed. It basically happened to use in the early 80's and knowing our luck it will happen again. And as you said it would probably be the end of us.
 
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Ur dead right RoC. Lets hope worst case scenario doesn't happen then! Ltes hope FG win 30 more seats and form a rainbow which delivers economic prosperity and social prosperity to all.
 

rockofcashel

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Rocky said:
rockofcashel said:
Jonathan_Rainey_FG said:
Could the changes in tax rate/bands/personal allowances not contribute to this as per last budget??

It's not the only aspect of govt economic policy we need to worry about though is it? With "falling" house prices, stamp duty and vat are bound to be hit in coming months. Could this slow down come to a sudden stop just ahead of polling day?
If FG are lucky .. worst case scenario for FG, is winning an election, and having all this fall into your lap late in the year .. you'll be blamed for killing the Celtic Tiger, and will never be elected again
I can see that happening a mile away. FG will get into a government a day later the economy will collapse and we wouldn't have even done anything yet and we'll be blamed. It basically happened to use in the early 80's and knowing our luck it will happen again. And as you said that would probably be the end of us.
Come on Rocky .. I'll give you a hug

Was that you on Q&A last night by the way ?
 

kerrynorth

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Jonathan_Rainey_FG said:
Could the changes in tax rate/bands/personal allowances not contribute to this as per last budget??
The answer is no. The budgetary changes do not kick in until around March I think and as I pointed out above the Jan 2005 and 2006 figures rose from E945million to E1.116million.

The most disturbing element is the fact the department themselves were out E160million, or 12-13%, and they are aware of all the timing issues re taxation an would taken this into account in their monthly profiling!
 

Rocky

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rockofcashel said:
Rocky said:
rockofcashel said:
Jonathan_Rainey_FG said:
Could the changes in tax rate/bands/personal allowances not contribute to this as per last budget??

It's not the only aspect of govt economic policy we need to worry about though is it? With "falling" house prices, stamp duty and vat are bound to be hit in coming months. Could this slow down come to a sudden stop just ahead of polling day?
If FG are lucky .. worst case scenario for FG, is winning an election, and having all this fall into your lap late in the year .. you'll be blamed for killing the Celtic Tiger, and will never be elected again
I can see that happening a mile away. FG will get into a government a day later the economy will collapse and we wouldn't have even done anything yet and we'll be blamed. It basically happened to use in the early 80's and knowing our luck it will happen again. And as you said that would probably be the end of us.
Come on Rocky .. I'll give you a hug

Was that you on Q&A last night by the way ?
No, definitly wasn't me.
 

hiker

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kerrynorth said:
Something that was not highlighted in the Dept. of Finance's January exchequer statement is that Income tax returns for the month are running at 12% below departmental expectations. In fact less was taken in Income tax this January as against January 2006. The budget reductions will not kick in until about March so this cannot be the explaination. E1.107billion was taken in this January as against E1.116billion last year and the departmental monthly profiling expected E1.27billion this January.

This massive as yet unexplaned gap in Income tax was more than compensated for by big increases in VAT, Stamp Duties and Corporation Tax therefore masking this gaping hole. However, seeing as the Income tax returns are a bell weather for employment it does point to some potential issues. Now, one month's figures do not neccessarily need raise alarm, but if this trend persists into the first quarter then it may point to employment problems.

If there are employment problems in the private sector then this may as yet not show up in unemployment stats as you can need to be unemployed for upto 9 weeks to claim benefits and many may be non-nationals whom are not entitled to benefits.

I am just pointing out something that needs to be watched in the next couple of months that may point to the economy not being as robust as we are all led to believe!
I might be missing something butI think its great news. :)
The hard working public took home more of their money than last year?
Sounds OK to me. :wink:
 
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That is a big chunk of money alright. I wonder why FG/Lab are not highlighting this????? If correct, this is a clear indication tax take from workers is heading towards a slump. Big fear.
 

NeilW

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It seems like only a short while ago that Joan Burton was lambasting the Minister of Finance for having much too big a surplus!

Wrt to the income tax receipts in January - I know from experience in the UK that income tax can be surprisingly variable. You might expect it to be quite stable month by month but in fact the timing of bonus payments made by the financial sector in particular can have huge effects (eg if Goldman Sachs delay their bonus round from Dec to Jan you will notice it in tax receipts stats). So the statisticians at the department can profile to their heart's content but they are never going to know when private sector companies choose to pay annual bonuses and so are always at risk of getting individual months very wrong. Perhaps bonus payments are not so significant in Ireland but overall I think you're right to say that one month's figures may not be significant and we'll have to wait and see over a longer period.
 

Dee Four

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hiker said:
I might be missing something butI think its great news.
The hard working public took home more of their money than last year?
Sounds OK to me.
No, it means the hard working public earned less
 

kerrynorth

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hiker said:
I might be missing something butI think its great news. :)
The hard working public took home more of their money than last year?
Sounds OK to me. :wink:
Yes you are missing something. These figures, which DO NOT take into account the changes announced in the budget, may mean they are less of us working hard and maybe even less of us working!
 

hiker

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kerrynorth said:
hiker said:
I might be missing something butI think its great news. :)
The hard working public took home more of their money than last year?
Sounds OK to me. :wink:
Yes you are missing something. These figures, which DO NOT take into account the changes announced in the budget, may mean they are less of us working hard and maybe even less of us working!
But these are a reduction on then same period last January, Correct?
Which means the tax take was lower than last januarys tax take, correct?
The budget of 2006 would easily account for that because it didnot kick in until last March 2006.

Its a bit of a leap to say that reduction a PAYE is an indication of falling employment, particualrly as Januarys employment figures show , yet again, another increase.

It may however point to an increase in the numbers employed on lower paid salaries has increased substantially.
 

kerrynorth

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hiker said:
But these are a reduction on then same period last January, Correct?
Which means the tax take was lower than last januarys tax take, correct?
The budget of 2006 would easily account for that because it didnot kick in until last March 2006.

Its a bit of a leap to say that reduction a PAYE is an indication of falling employment, particualrly as Januarys employment figures show , yet again, another increase.

It may however point to an increase in the numbers employed on lower paid salaries has increased substantially.
Then how do you explain the Jan 2005 and 2006 figures which went up from E945million to E1.116billion that would have taken into account reductions in the December 2004 budget? Plus as I keep repeating the Dept. of Finance themselves expected E1.27billion and they are the one's who would have taken the 2005 budgetary changes into account in their calculations!

As I stated earlier there would be a lag in unemployment figures as you can need to be unemployed for upto 9 weeks before claiming benefits and many may be non-nationals whom are not entitled to benefits. You would need the quarterly household figures to show this up as well as the Feb/March unemployment figures rather than January's.
 

NeilW

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kerrynorth said:
As I stated earlier there would be a lag in unemployment figures as you can need to be unemployed for upto 9 weeks before claiming benefits and many may be non-nationals whom are not entitled to benefits.
Unemployment is a red herring - it is employment figures you need to look at (and Hiker seems to be quoting though I wouldnt know where to find them for Ireland myself). Unemployment and employment can both go up in the same month or both go down in the same month or move in different directions. With a lag of one month the figure you need to look at is employment in Dec 2006 and employment in Dec 2005. Does anyone have those to hand?

I agree though that a good comparison is the profile figure from the department as this should take into account all changes to the regime that you or I or anyone else without access to the data would not be able to model. But for reasons given above (and many others actually) there is always the potential for this to be wildly out in any individual month - it is definitely worth keeping an eye on but I haven't seen anything to suggest there is definitely a story here yet.
 

kerrynorth

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NeilW said:
Unemployment is a red herring - it is employment figures you need to look at (and Hiker seems to be quoting though I wouldnt know where to find them for Ireland myself). Unemployment and employment can both go up in the same month or both go down in the same month or move in different directions. With a lag of one month the figure you need to look at is employment in Dec 2006 and employment in Dec 2005. Does anyone have those to hand?

I agree though that a good comparison is the profile figure from the department as this should take into account all changes to the regime that you or I or anyone else without access to the data would not be able to . But for reasons given above (and many others actually) there is always the potential for this to be wildly out in any individual month - it is definitely worth keeping an eye on but I haven't seen anything to suggest there is definitely a story here yet.
We do have quarterly household surveys that gauge employment figures on a quarter basis, again this a significant time-lag. Unemployment has just ticked up a bit to 4.5% in January from a steady 4.3-4.4% last year although the claimant count did not shift much.

There is very much the potential for one month's figures to be well out and I gave this health warning in my original post. However, if by the March returns this trend persists then we can surmise that there is something going on in the employment market even if the employment/unemployment figures have yet to reflect this such are the time-lags!
 

kerrynorth

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There was an IBEC guy on 6.1 news alluding to the fact that there is something strange going on in the private sector. This may be the reasoning behind the weakness in Income Tax in the January returns! Although he did not spell it out he left it hanging in the air. Have IBEC also picked up on a big change in the private sector?
 
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