Monthly fall in corporation tax underlines vulnerabilities in the public finances – Ministers McGrath & Donohoe

4th September, 2023

  • Today’s Exchequer figures show that tax revenues to end-August were €53.1 billion, up by €3.3 billion or over 6½ on the same period last year. 
  • Income tax receipts amounted to €20.7 billion to end-August, up by over 8 per cent on the same period last year;
  • VAT receipts to end-August stood at €13.5 billion, up by €1.4 billion or over 11 per cent on 2022;
  • Corporation tax receipts to end-August of €12.7 billion were up on last year by €0.9 billion or 7.3 per cent;
  • However, corporation tax receipts declined sharply in August, with receipts around €1 billion lower than in the same month last year, highlighting the inherent volatility in this revenue stream;
  • Total gross voted expenditure to end-August amounted to €56.4 billion, €4.9 billion or 9½ per cent above the same period in 2022;
  • An Exchequer deficit of €0.3 billion was recorded to end-August.

Tax receipts were €53.1 billion to end-August, up €3.3 billion or 6.6 per cent on an annual basis, driven by strong income tax, VAT, and corporation tax receipts.

At €20.7 billion to end-August, cumulative income tax receipts remain robust, up by 8.2 per cent on an annual basis, reflecting the strength in the labour market.  On a monthly basis, receipts of €2.5 billion were up by just under 4 per cent.

August is a non-VAT-due month and receipts of €0.3 billion were accordingly modest. On a cumulative basis VAT remains strongly ahead of the same period in 2022, up by €1.4 billion or 11.2 per cent.

Corporation tax to end-August was €12.7 billion, up on last year by €0.9 billion. However, on a monthly basis receipts of €1.8 billion were down by €1 billion on August last year. While a sharp drop was anticipated, and there may be some timing issues, the magnitude of the decline is somewhat larger than had been expected, highlighting the inherent volatility in this tax head.

Total gross voted expenditure to end-August amounted to €56.4 billion; €4.9 billion or 9½ per cent ahead of the same period in 2022. This reflects continued increases in capital investment as part of the National Development Plan and support for our public services and our growing population.

An Exchequer deficit of €0.3 billion was recorded to end-August.  This compares with a surplus of €6.3 billion in the same period last year.  The year-on-year deterioration is primarily driven by the transfer earlier this year of €4 billion in windfall tax receipts to the National Reserve Fund as well as the decline this month in corporation tax receipts.

Commenting on the figures, the Minister for Finance, Michael McGrath T.D. said: 

“The tax data to end-August return remain broadly positive, with tax revenues €3.3 billion ahead of the same period last year.  However, the €1 billion drop in corporation tax this month, compared with the August 2022 figures, serves as a timely reminder of the underlying vulnerabilities that still remain in our public finances.

“This is a risk that I have highlighted many times, and Government has taken a number of steps to mitigate our exposure to this volatile revenue stream.  €6 billion in windfall corporation tax receipts has been transferred to the National Reserve Fund, and work is ongoing in relation to establishing a longer-term investment fund.  Government has also committed €2¼ billion in windfall receipts to fund increased capital investment over the period 2024-2026, enabling us to use some of these temporary revenues to fund permanent improvements to our economy and society.

“As we approach Budget 2024, the fall in corporation tax reinforces the importance of striking the correct balance between continuing to invest in our public services and maintaining the long-term sustainability of our public finances.”

The Minister for Public Expenditure, NDP Delivery and Reform, Paschal Donohoe T.D. said:

“Today’s publication reports expenditure of €56.4 billion in the first eight months of 2023; almost €5 billion higher than the same period last year. This investment is delivering greater access to public services and supports, and enhancing our infrastructure to support our growing population.

This continues our commitment to providing better public services to support improvements in the quality of life in Ireland both now and in the future. This is the core ambition of Government and will be a key focus of the upcoming Budget negotiations. I have recently set out the context for these negotiations in the Summer Economic Statement and the Mid-Year Expenditure Report. The parameters outlined reflect the Government’s commitment to delivering high-quality public services and infrastructure while ensuring the economy and public finances remain on a sustainable pathway. I will be engaging with my colleagues over the coming weeks to ensure we can effectively deliver on these key priorities.”


Fiscal Monitor August 2023