Income tax revenue continues to hold up despite Covid-19 lockdown, new figures show
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Supports under the Wage Subsidy Scheme and Pandemic Unemployment Payment continue to help boost the amount the Government is collecting in income tax revenues, while Vat receipts continue to fall well short, the latest monthly exchequer returns show.
The Government collected €1.75bn in income tax revenues in February, only a little lower than the amount gathered from the same major tax source in February 2020, just before the onset of the Covid-19 economic crisis.
Remarkably, for the first two months of this year, income tax revenues, at a total of €4bn, are running slightly ahead of the same two-month period in 2020, giving some confidence the Government will not need to borrow billions more than it has already targeted in its fight against the pandemic.
At less than €300m in February, Vat receipts, the exchequer's second most important tax source, continued to show the effects of the level 5 lockdown that has closed off large parts of the economy for consumers who have kept their jobs during the pandemic.
February, however, is a non-Vat payment month and the receipt from this tax source provides little new information on the state of the economy at this stage.
At €8.4bn, the Department of Finance said overall tax revenues for the first two months were down by 9.3% from 2020, while, at €12.4bn, gross spending was up 20.5% in the same period.
The Government and independent economists forecast the budget deficit this year will be between €18bn and €19bn, with the longer-than-anticipated third lockdown being the unknown in the calculations. However, the State can finance at historic low-interest costs – debt servicing costs at less than €420m in February were lower than in February 2020.
Finance Minister Paschal Donohoe said the pandemic continued to weigh on the finances, adding "there are grounds for optimism" as Covid cases fall and the roll-out of vaccines progresses.