Excess corporation tax receipts will be used to increase end-of year surplus, better positioning Ireland for risks ahead
Taxation receipts increased considerably in November, primarily due to a very strong corporation tax performance;
Total tax receipts in 2019 to end-November were €54.9 billion, up 6.7% year-on-year and driven by strong growth across all major tax heads;
Gross voted expenditure is up 6.6% year-on-year and slightly behind of profile by 1.4%.
November is the largest tax collection month of the year, and the largest collection month for Income, Corporation and Capital Acquisition Taxes. Figures published today (Tuesday) by the Department of Finance in the November Fiscal Monitor show that taxation receipts in the month were up €741 million or 8.1 per cent on the November target and were €645 million or 7.0 per cent greater than in the same month last year, primarily due to a very strong corporation tax performance.
While cumulative Corporation Tax receipts in the year to date are now €1,408 million above profile, it should be noted that the Fiscal Monitor reports tax outturns against Budget 2019 targets. Based on continuous engagement with the Revenue Commissioners, the Department of Finance increased the Corporation tax target in April by €500 million for the Stability Programme Update 2019 and by a further €300 million in October for Budget 2020. The Corporation Tax over-performance relative to the Budget 2020 target stands at €602 million.
In the year to date, overall tax collections have grown by €3,455 million, or 6.7% year-on-year. This is driven by growth across all major tax heads, primarily Income Tax with growth of €1,664 million or 8.6%, and VAT with growth of €759 million or 5.4%.
Welcoming the figures, the Minister for Finance and Public Expenditure & Reform, Paschal Donohoe T.D., emphasised that:
“These additional receipts are not being used to finance new expenditure measures. Instead, excess revenues will add to our headline surplus at the end of the year, building fiscal buffers and placing Ireland in a strong position to meet the challenges ahead.”
“I am also conscious of the increasing concentration — and potentially transitory nature — of revenues from Corporation Tax receipts. These risks have been well flagged and the Department of Finance published a paper at Budget time tilted ‘Addressing Fiscal Vulnerabilities’ that assessed the vulnerability of the public finances to an over-reliance on this revenue stream. The best defense against this exposure is to run Budget surpluses. That is why, earlier today, I set out our medium-term Budget strategy which is based around achieving a surplus of 1% of GDP, or around €3.8 billion, by 2022. That said, however, this is contingent upon continued economic growth. In the event of a disorderly Brexit, running a deficit is the appropriate way to protect the economy. In this case I envisage that the budgetary balance would be restored by around 2023. ”
Minister Donohoe also stated that:
“Public expenditure is being managed within expectations and the annual increase reflects the Government’s commitment to the delivery of improved public services. It also reflects the importance the Government attaches to addressing infrastructural bottlenecks in order to boost resilience – especially important given the UK’s forthcoming exit from the European Union – and to maintain continued improvements in our living standards.”