Tax revenues holding up well, but crisis spending runs up €12bn loss for State
Michael Public Minister Mcgrath And Expenditure Minister Finance Donohoe Paschal Reform And
The Government collected €29.5bn in taxes in the first six months of this year, with both income tax and corporation tax holding up despite the Covid crisis, latest exchequer returns show.
However, the figures show the State has run up a deficit of almost €12.3bn in the last 12 months due to the amount of money it has pumped out in a bid to stem the economic emergency caused by the pandemic.
While the value of annual comparisons has been diluted due to the impact the pandemic has had on the economy, the Department of Finance said overall tax receipts for the first half of 2021 were just over 5% ahead of target and 10% higher than the same period last year.
Income tax receipts totalled €12.2bn for the six months to the end of June, nearly 16% up year-on-year and, more importantly, almost 4% ahead of target.
June is a non-Vat due month, but Vat receipts are still at €7.2bn for the year, 5% ahead of target and nearly 22% up on last year.
However, that figure was down on the same period last year by 2.6%. This was due to the impact of €398m of Covid Restrictions Support Scheme payments.
June is the second most important month of the year for corporation tax receipts and that segment outperformed by beating monthly targets by 15%.
Finance Minister Paschal Donohoe said the figures show Ireland can be confident about its recovery.
“Although we continue to borrow significant amounts of money in order to fight the pandemic, tax receipts to end-June show that we can look forward to the recovery with confidence," he said.
"Income taxes and Vat, in particular, remain robust as businesses and consumers have shown remarkable adaptability and resilience. Despite continuing uncertainty, [the] figures show that we can look forward to a sustainable and broad-based recovery," Mr Donohoe said.
"While global tax changes leave considerable uncertainty regarding future corporation tax receipts, the robust figures year to date show how key sectors such as pharma and technology have been left relatively unscathed by Covid,” said Peter Vale, tax partner with Grant Thornton Ireland.
"Add in the fact that Vat receipts have returned to pre-Covid levels — a remarkable achievement — it shows how well the Irish economy has weathered Covid." Mr Vale said.
Earlier this week, the Central Bank again suggested there may be a need to increase taxes in upcoming budgets and not rely on constant borrowing to cover costs, even though the economy is expected to grow strongly this year and next.
However, Mr Vale suggested the opposite could be on the cards on the back of the latest tax return figures.
“It leaves the Government in an interesting position approaching Budget 2022. There may now be scope to consider reductions to our relatively high marginal income tax rates, although this could prove politically challenging,” he said.