Robust Corporation Tax receipts offset steep decline in VAT and Excise in first 6 months
- Today’s Exchequer returns show that tax revenues to end-June were up 0.7 per cent, or nearly €200 million on end-June last year, owing to increased corporation tax receipts of over €1.7 billion.
- Cumulative income tax receipts to end-June are flat on a year-on-year basis, but fell over 20 per cent in June compared to the same month in 2019.
- Reflecting significantly reduced consumption, VAT receipts are down over €1.5 billion, or 20 per cent, compared to the first half of 2019.
- Similarly, excise receipts fell by 24 per cent, or €700 million to end-June.
- The first tranche of the NAMA surplus, some €2 billion, was transferred to the Exchequer in June.
- Total net voted expenditure in the first half of the year was €31.9 billion, up by €6.8 billion, or over 27 per cent on last year.
- The rise in expenditure reflects increased departmental drawdown in response to the Covid-19 pandemic, particularly in the areas of health and social protection.
- An Exchequer deficit of over €5.3 billion was recorded to end-June 2020.
An Exchequer deficit of €5,331 million was recorded to end-June 2020. This compares with a surplus of €260 million in the same period last year. The €5,591 million year-on-year deterioration in the Exchequer balance is primarily driven by increases in voted current and capital expenditure. Cumulative tax receipts for the year are €26,863 million, up €192 million, or 0.7 per cent, over the same period last year. Receipts to end-June have benefitted from a strong performance in January and February as well as solid corporate tax receipts.
Cumulative income tax receipts to end-June are flat on a year-on-year basis, raising by 0.5 per cent. Although the progressive nature of the income tax system is still providing some protection to aggregate receipts, income taxes suffered a significant year on year decline in June, falling by 20.8 per cent, or €368 million.
Corporation tax receipts continue to show resilience to the general economic downturn, finishing the first half of the year €1,721 million higher than the same period last year. Information from the Revenue Commissioners is that most of these payments are based on increased profitability across a range of firms and sectors. VAT and excise receipts show the continued reduction in consumption. VAT is down €1,525 million to end-June compared to the same period last year, while excise is down €697 million.
Overall, the aggregate outturn to end-June reflects a steep year on year decline in VAT and excise but offset by strong corporation taxes. Receipts also benefitted from a large balance, some €581 million, in the unallocated account this month. Revenue is following its standard procedures in accounting for receipts in the unallocated taxes account. The higher than normal receipts in June relate to a complex tax issue and is expected to be resolved in July, whereby the money will be reallocated to the appropriate tax head.
Total net voted expenditure to end-June was €31,920 million. In year-on-year terms, this was up €6,843 million, or 27.2 per cent on the first half of 2019. The rise in expenditure reflects increased departmental drawdown in response to the Covid-19 pandemic, particularly in relation to the Department of Health and the Department of Employment Affairs and Social Protection.
Commenting on the figures, the Minister for Finance Paschal Donohoe T.D. said: ‘Today’s figures show that although the expected decline in tax receipts has been partially offset by strong corporation taxes, we are on course to run a deficit of €23 to €30 billion this year, as outlined in the Stability Programme Update in April. A deficit of this scale is extraordinary, but we should continue on to the next phase of our response to this crisis. The Government is currently working on a fiscal stimulus plan that will — first and foremost — get people back to work. A package of measures will be introduced that will build on existing measures in order to help kick-start the economy, safeguard jobs and protect people’s livelihoods.’
Minister for Public Expenditure and Reform Michael McGrath T.D. said: ‘The expenditure position at the end of June reflects the decisions made to date to support the economy, enterprises and households from the unprecedented shock of Covid-19, and to provide the necessary funding to our health service to fight the pandemic. We will continue to provide the funding needed to protect our public services. Further resources will be needed in the period ahead to fund the essential stimulus measures as we work to repair and rebuild the Irish economy. The challenge ahead is immense but I have no doubt our economy can and will recover. As a new Minister, I am very much looking forward to my role in this process.’
ENDS
Notes to editors:
- The forecast for tax revenue was set out in SPU 2020 in April.
- Tax revenue last year amounted to €59.3 billion.
- The April Fiscal Monitor incorporated the revised taxation profiles for 2020.
- Gross voted expenditure on public services and infrastructure last year amounted to €67.4 billion, including over €10 billion in expenditure funded from the Social Insurance and National Training Funds. This was composed of current spending of €60 billion (annual increase of 5.2 per cent) and capital spending of €7.4 billion (annual increase of 22.5 per cent).