Falling corporation tax receipts give Government scare over Covid-19 finances
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The Government has got a scare over financing the billions in Covid-19 spending after the once-reliable corporation tax revenues unexpectedly stumbled in October, despite the profits generated by the pharma giants and other multinationals during the pandemic.
The figures on tax revenues from the latest exchequer returns have been complicated this month by Government accounting that deducts the €550m cost of the Covid Restrictions Support Scheme, a key budget measure, in equal parts from the streams of corporation and income tax revenues.
However, at €198m, corporation tax revenues nonetheless seriously underperformed in October even after its €275m share for the Covid support scheme is taken into account.
Government officials were anticipating some sort of fall-off in corporation tax receipts compared with the outstanding outcome in October 2019, but the shortfall in the latest month was a surprise.
Corporation tax revenues had powered this year despite the Covid-19 crisis, as multinationals based in Ireland appeared to have significantly boosted their profits as healthcare spending soared around the world.
It is “certainly a concern”, a Finance Department spokesman said, referring to the corporation tax receipts.
Government ministers will now be looking ever more closely at the revenues it collects this month, the single biggest period for corporation tax receipts.
Referring to corporation tax revenues, Minister Paschal Donohoe reiterated the Government could not rely on ever buoyant receipts, “a fact that will be reflected in the department’s medium-term forecasts when published in the spring”.
Overall, the returns showed that after allowing for the €550m deduction for the Covid scheme, the exchequer collected just over €3bn in revenues in the month, only slightly below October 2019's levels.
Income taxes took in almost €1.6bn in October, after deducting €275m for the Covid scheme, the figures show. However, income tax revenues have held up remarkably well this year.
Of the four major tax sources, Vat receipts have been the hardest hit by the Covid-19 crisis. In a non-Vat payment month, the tax source took in €275m, while over the full 10 months, cumulative Vat receipts are running at €10.1bn, a shortfall of €2.4bn from the same period last year.
The department said revenues for the first 10 months were boosted by the pre-Covid good performance at the start to the year for income taxes and from corporate tax “which have compensated — to an extent — for sharp declines in other tax heads, notably Vat, and excise receipts”.
Peter Vale, tax partner at Grant Thornton Ireland said the outcome of corporation tax revenues for the full year is now causing uncertainty.
“Today’s very disappointing figures will raise concerns that tax receipts in November, the key month for corporation tax, will be well behind last year. This could see the year-to-date surplus of circa €1bn eroded completely,” he said.