CORPORATION TAX DECLINED by over 12% in September, the second consecutive month that the revenue has fallen year-on-year, the latest exchequer figures show.
In the nine months to the end of last month, corporation tax was €14.4 billion, up €600 million or 4% on last year.
However, corporation tax receipts came in at €1.8 billion in September, a fall of €300 million or 12.4% on the same month last year.
According to the Department of Finance, this underlines “the volatility in this tax head”.
Speaking to reporters, Minister for Finance Michael McGrath said the Government has been “sounding the warnings for quite some time” in relation to the slowdown in growth of corporation tax receipts.
“We are still seeing growth year-on-year in corporation tax receipts, but the days of corporation tax receipts growing at a really high rate year-in year-out, we believe, are over,” he said.
“Of course the external environment has changed as well. We are witnessing a deteriorating global economy. We have seen exports of goods from Ireland fall. We are seeing in particular weaknesses in the pharmaceutical area. There are some Covid-based effects as part of that, and also in relation to ICT hardware.
“This is not surprising. We have always highlighted that this is a particularly volatile tax head and anything that can go up as quickly as it has gone up is subject to significant fluctuations.”
McGrath pointed to the fact that the yearly forecast corporation tax receipts was revised upwards, from €22.7 billion forecast in September 2022 to €24.3 billion in April this year.
“What we’re signalling today is that based on the advice of my own officials, based on the assessment of the Revenue commissioners, we think it will fall short of that revised forecast, but it’s still likely to represent year-on-year growth.”
Tax revenues to end-September were €61.4 billion, up 6.1% or €3.5 billion on the same period last year.
Income tax receipts were up 8.2% annually to €23.1 billion, something the Department said reflects “a labour market that is operating at full employment”.
VAT receipts to end-September stood at €16.8 billion, up by 10% or €1.5 billion on last year.
Total gross expenditure amounted to €64.4 billion, up 8.7% or €5.2 billion on the same period last year and 0.7% ahead of profile.
An Exchequer surplus of €1.1 billion was recorded to end-September. This compares with a surplus of €7.9 billion in the same period last year.
According to the Department of Finance, the bulk of the decline was largely driven by the transfer earlier this year of €4 billion in windfall tax receipts to the National Reserve Fund.
McGrath said the returns are a “timely reminder” of the need for careful management of our public finances.
He said that the economy has proven to be “remarkably resilient given the shocks of the last number of years”. However, he said “the vulnerabilities are clear”.
“Next week, Minister Donohoe and I will present a Budget that provides an overall package of €6.4 billion, which as you know, is comprised of additional core public expenditure of just over €5.2 billion and a net tax package of just over €1.1 billion.
“My department will also publish an updated set of macroeconomic and fiscal projections as part of the current Budget, but it seems likely there would be a levelling-off of growth in corporation tax compared to the extraordinary levels of the last few years.
“In addition to the budget package for next year, given capacity constraints, and the fact that inflation still remains high in comparative terms, there will be a limited amount of space available this year for temporary once-off supports to assist with the cost of living focused, where we can, on the most vulnerable.”
Commenting on today’s figures, Peter Vale, tax partner at Grant Thornton, said the results were a mixed bag.
“Of most concern will be corporate tax receipts, 12% down on September last year. This follows a weak set of figures in August and underlines the volatility of corporation tax receipts,” he said.
He said if this performance is repeated in November, “the expected large Budget surplus for 2023 will be under threat”.
“While the tax landscape continues to evolve, a pick-up in global economic conditions could yet see a bounce in corporate tax receipts next year, with a further potential boost from 2026 when the effective tax rate for large groups rises to 15%.”
To embed this post, copy the code below on your site
have your say