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Corporation tax take drops for third month in a row

By November 6, 2023No Comments

The Exchequer recorded a deficit of €900m at the end of October, the latest figures from the Department of Finance show.

The Exchequer returns, published this afternoon, also show a drop in corporation tax for the third month in a row.

Corporation tax was just over €1bn lower, or 45% less, last month than the amount collected in October last year.

In a statement the Department of Finance said the fall-off reflected weakness in the export sector, particularly in pharmaceuticals.

In the year-to-date, corporate tax receipts of €15.7 billion are now behind the same period last year by €400 million or 2.7%.

The drop in corporation tax brought down the overall tax take by almost €1bn or 16.4% compared to October 2022.

On a cumulative basis, however, the tax take is still up €2.5 billion or 4% in the ten month period to the end of last month compared to the same period last year with income tax and VAT continuing to perform strongly.

Income tax receipts of €2.6 billion were up on October last year by €100 million or 2.4%.

While on a cumulative basis, income tax receipts of €25.7 billion were €1.8 billion or 7.6% ahead of the same period last year.

October is a non-VAT due month and accordingly, modest receipts of €200 million were recorded in the month. VAT receipts to end-October totaled €17 billion, €1.6 billion or 10% higher than in the same period last year.

Excise duty receipts of €500 million were down on the same month last year by €100 million. On a cumulative basis, excise receipts of €4.6 billion are broadly flat on the same period last year.

The overall deficit of €900 million recorded at the end of October compares to a surplus of €7.3bn in the same period last year.

On a 12-month rolling basis, the Exchequer recorded a deficit of €3.2bn.

Excluding one-offs, such as transfers to the NRF, proceeds from the disposal of bank equity and estimated ‘excess’ corporation tax receipts, an underlying deficit of around €9 billion was recorded on a 12-month rolling sum basis.

Gross revenue to the end of October stood at €82.3bn, down 1.3% on the same period last year.

Excluding receipts from repayments of loans to the Social Insurance Fund, gross revenue increased by €1.3bn or 1.6% on an annual basis.

Commenting on the figures, Minister for Finance Michael McGrath said the returns present a mixed picture of our public finances.

“While income tax and VAT remain steady, demonstrating the underlying strength of our economy, we have now seen corporation tax decline for a third consecutive month.

“A fundamental building block of the Government’s fiscal strategy is the assumption that a large part of the increase in corporation tax receipts in recent years is windfall in nature,” he added.

Minister McGrath said this is why it is important that permanent fiscal commitments are not made on the basis of windfall returns.

He said it is also why he announced the establishment of two new long-term investment funds in Budget 2024.

“The Future Ireland Fund and the Infrastructure Climate and Nature Fund – will allow us to invest temporary ‘windfall’ corporation tax receipts to provide resources for known future fiscal challenges and ensure that these receipts do not become part of the permanent expenditure base.

“I am working with my officials to progress the necessary legislation and this is a key priority for the Government in the year ahead,” he said.

Reacting to today’s figures, Tom Woods, Head of Tax at KPMG said the €1 billion fall in corporation tax receipts for October appears to be a much bigger drop than anticipated.

“November, which is the biggest month for corporation tax, will give greater visibility on where 2023 receipts will likely end up, but the signs are pointing to a greater fall in planned receipts than even the revised projections had estimated,” he added.

Peter Vale, Tax Partner at Grant Thornton Ireland said a weak November would have a significant impact on the expected full year 2023 Budget surplus.

“While the global corporation tax landscape continues to evolve, fundamentally corporation tax receipts are lower due to weaker expected profits in some of the largest multinational groups based here,” he said.

“2023 tax receipts are now only marginally ahead of 2022, meaning the scale of the expected Budget surpluses over the coming years may need to be scaled back,” he added.

Earlier today, the IMF said the Irish economy had shown resilience in recent years but cautioned that strong headline figures masked underlying vulnerabilities.

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