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Exchequer deficit for 2020 now €9.4bn as Finance Minister reaffirms pledge of no income tax increase in Budget

Overall, tax receipts have remained strong despite the Covid-19 pandemic.

Finance Minister Paschal Donohoe.
Finance Minister Paschal Donohoe.
Image: PA Images

THE GOVERNMENT RAN a €9.4 billion deficit for the first three quarters of the year, but has said that tax receipts have remained strong despite the Covid-19 pandemic.

The latest exchequer figures come less than two weeks before the upcoming Budget, which Finance Minister Paschal Donohoe has said will be based on the assumption of a no trade deal Brexit.

Overall, tax receipts for the year are at €39.57 billion, down by just 3% on last year.

This robustness is due to a strong January and February and solid corporate taxes that have largely compensated for a decline in VAT and other excise duties.

VAT is down by over €2.4 billion in the year to September, reflecting the dramatic decline in consumer spending.

Donohoe described the figures as a “snapshot of the public finances”.

He added that, while tax receipts remain robust, the scale of the corporate tax stream cannot be relied up “over the medium term”. 

The government supports put in place as a result of the pandemic can be seen in total exchequer expenditure increasing by €9.6 billion to €48.1 billion in the first nine months of the year. 

The Social Protection spend alone this year is being forecast at more than €30 billion.

“This response from government reflects the scale of the impact that the pandemic has had on people’s jobs and income,” Minister for Public Expenditure Michael McGrath said.

Donohoe told reporters this afternoon:

In essence what has happened over the last number of months is the balance sheet of the State stepped in to take the place of private sector spending and employment activity across the last number of months.

Speaking about the outlook with regards to the upcoming Budget 2021, McGrath said the government was anticipating that “a significant portion” of the Covid-19 related spending from this year would be incurred again next year. 

This was echoed by Donohoe who said that “what is very different” about next year’s finances is that the government will have to plan for the exceptional expenditure from this year “carrying forward” into next year. 

“Can I give you an impact on what that will mean for our deficit for next year? At this moment I truthfully can’t,” Donohoe said. 

The Finance Minister has previously indicated that the government is not minded to increase income taxes in the upcoming Budget and he reiterated that this evening.

“One of the many reasons why we’ve been clear from the start about the Budget on Tuesday week in relation to personal taxation has been the great concern we  have that if we were to indicate that there’s going to be tax changes very imminently, that would affect how people are spending,” he said. 

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“What we want to be doing is giving confidence to those who are saving at this rate, confidence to spend, to invest and, when our public health guidance allows for them to do it, to use this money in a way that will lead to employment growing again.”

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Rónán Duffy

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