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Dramatic slide in government finances: €6 billion deficit in May compared to €63m last year

The Covid-19 crisis has placed a heavy demand on the country’s finances.

Minister for Finance Paschal Donohoe speaking at the Department of Finance this afternoon.
Minister for Finance Paschal Donohoe speaking at the Department of Finance this afternoon.
Image: Leah Farrel/RollingNews.ie

THE STATE’S BUDGET deficit hit €6.1 billion in May, as the ongoing Covid-19 crisis puts pressure on government finances.

Spending on health and on income supports such as the Pandemic Unemployment Payment have added significant pressure to state spending, according to figures from the Department of Finance released this afternoon. 

The current deficit contrasts with a deficit of €63 million recorded in the same period last year. 

The figures also show that total government expenditure at the end of May was 19% greater than expected – up by €4.175 billion. 

The Department of Finance revealed that tax receipts for May amounted to €6,218 million – an increase of 1.3% compared to the same period last year. The department said that a decline in excise and VAT receipts was offset by strong corporation tax and larger than expected returns from income tax. 

Income tax receipts fell €137 million, or 7.8% year on year – a figure that was lower than expected by the Department of Finance. 

However, the Minister for Finance Paschal Donohoe said in contrast, PRSI receipts declined by close to 16% in May.

“PRSI reflects a more comprehensive picture of the labour market given that it applies to all workers, whereas some workers, pay little or no income tax,” he said.

In contrast, corporation tax receipts were €1,224 million higher than May last year. 

Total tax revenue last year totaled €59.3 billion. 

Donohoe said that the figures show “that the expected steep decline in consumption taxes has been offset by a rise in corporation tax and relatively resilient income taxes”. 

He told reporters in the Department of Finance this afternoon: 

“These figures are a snapshot in time. And given the radically uncertain outlook we face, it is important to emphasise that we cannot, from these figures, extrapolate a reliable future trajectory for the economy, or even the public finances for the rest of the year.”

He said the government will await the June expenditure and taxation figures to form a “rounder assessment” of how the economy will perform in 2020.

He added: “Corporation tax is going to continue to be a very important form of tax collection in 2020.”

Pandemic Unemployment Payment

Speaking to reporters this afternoon, Donohoe confirmed that the Pandemic Unemployment payment and the wage subsidy scheme will be extended. 

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“It is the case that we do have some issues in relation to that payment that we need to consider,” he said. 

He said he was awaiting new data from the Department of Social Affairs and Protection that would help “provide a signal to our economy regarding how long the PUP will continue and if during that period of continuation, if and what changes are going to happen”. 

He also said that the wage subsidy scheme will not be “disappearing overnight”. 

The finance minister also downplayed any suggestion that there could be a fast-tracking of the government’s road-map for loosening restrictions. 

He said that he wants to ensure that when shops, restaurants and businesses re-open, people will feel safe. 

The National Public Health Emergency Team (NPHET) is due to meet tomorrow and will make a recommendation to government regarding Phase Two of the easing of restrictions thereafter.

Earlier today, health minister Simon Harris warned that opening up the country – specifically, scrapping the 20km travel guidelines in Phase Two – too fast would risk spreading the virus to other parts of Ireland. 

Yesterday, health officials confirmed that a further eight people with Covid-19 have died in Ireland. 

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