CORPORATION TAX RECEIPTS fell by 45% in October, amounting to a loss of over €1 billion when compared to the same month last year.
The state’s fiscal monitor for October shows that the government collected €1.3 billion in corporation tax last month.
This is the third consecutive month in which receipts for the tax have declined, when compared to the same month last year.
The monitor says this continuing decline underlines the volatility in the tax and reflects the “weakness” of Irish exports this year. The monitor adds that this weakness has been particularly seen in the pharmaceutical sector.
So far this year, the receipts from the tax – seen as a major support for the economy and an attraction for multinationals – have collected a total of €15.7 billion, €400 million less than the same period last year.
Finance minister Michael McGrath said this month’s report from the department presents a “mixed picture” of public finances.
McGrath suggests the continued decline reflects the importance of the state’s fiscal strategy not to be reliant on corporation tax receipts, as they have become “windfall in nature”.
The minister used the volatility of these receipts to justify the state’s continued stance not to rely on budgetary surpluses and instead look towards investment schemes, such as the Future Ireland Fund and the Infrastructure, Climate and Nature Fund announced in the budget last month.
The state plans to invest €100 billion into these funds to “future proof” the economy, instead of being solely reliant on what’s becoming a volatile form of public revenue.
In total, the state collected €5.1 billion in revenue in October – another €1 billion loss when compared to the same month last year.
Although, €66.5 billion has been collected in total so far this year, which is up €2.5 billion compared to last year that the department says is “driven primarily by income tax and VAT”.
Peter Vale, a Tax partner with Grant Thornton, described the figures as “stark” and suggested the trend could have a “significant impact” on the estimated budget surplus if it were to continue into November.
Vale added that the fall off in receipts reflect the evolving global landscape as “fundamentally corporation tax receipts are lower due to weaker expected profits in some of the largest multinational groups based here”.
VAT receipts now total €17 billion, which the department has suggested is propping up the current revenue. October is a non-VAT due month, leading to a €200 million receipt for the period.
Compared to the same period last year, VAT receipts are 10% higher despite rising costs that Irish consumers are facing.
Vale says the revenue collected from this tax is “levelling off”, reflecting these increased costs but noted the resilience of the Irish consumer base as a cause of the higher rate that has been collected during the first ten months of this year.
An Exchequer deficit of €900 million was recorded at the end of October by the department, representing a decline of over €8 billion on the surplus recorded in the same period last year.
The Department of Finance said this deficit is “driven by a number of factors” including increased public expenditure, reduced non-tax revenue and the transfer earlier this year of €4 billion to the National Reserve Fund.
Minister for Public Expenditure Paschal Donohoe highlighted these public investments today when commenting on the report from the department. Donohoe said the money is being used to support services, infrastructure and living standards.
Donohoe said: “The Government’s planned and balanced approach to fiscal policy has allowed us to manage these priorities while providing supports for those who most need it in the face of emerging external challenges.”
The total state expenditure for the first 10 months of the year has increased by €5.6 billion, compared to the same period last year, amounting to a total of €72.2 billion as of the end of October.
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