Surprise €800m corporate tax hike boosts state budget
A surprise €800m increase in corporation tax revenue last month has put the government in a stronger financial position ahead of the next budget.
The latest statements from the Ministry of Finance show that the business tax generated 1.04 billion euros in August, or 323%, or 797 million euros, more than expected. August is generally a quiet month for corporation tax.
The department said “the outperformance was due to higher than expected payouts from a number of large companies, primarily in the ICT sector, which may reflect increased sales resulting from the pandemic.”
Corporate tax, which is threatened by upcoming changes to the global tax system, has generated €7 billion so far this year, €859 million more than expected at the start of the year.
Cumulatively, the government collected 39.4 billion euros in taxes in the first eight months of the year, or 2 billion euros, or 5.4%, ahead of profile.
The total was also 15% higher than last year, but the department warned that year-on-year comparisons were of limited value given “the timing of the various restriction periods the last year and the unprecedented nature of the impact of the pandemic”.
This solid performance is explained by the continued strength of income tax revenues, which generated 16.5 billion euros over the period, as well as a significant recovery in VAT revenues, which brought in 9. 8 billion euros, or 6% more than the profile.
The improvement in VAT receipts reflects the reopening of the economy in recent months and the recovery in consumer spending.
The government’s nominal budget deficit – rolling 12 months – was €9.5bn in August, reflecting ongoing spending on pandemic-related supports.
Commenting on the figures, Finance Minister Paschal Donohoe said corporation tax receipts in August “were unusually high, illustrating the inherent unpredictability and volatility of this revenue stream.”
“As I have said several times, we cannot count on such revenues in the medium and long term,” he said.
“The best form of defense against potential corporate tax cuts is to cut the deficit,” Donohoe said, noting that the 2022 budget would chart a credible path to fiscal sustainability while allowing continued investment. in our public services, especially in infrastructure.
Figures show spending for the eight-month period was €53.4 billion, 3% below the profile but 2.6% higher than the same period in 2020.
Public Expenditure Minister Michael McGrath said current spending for the year was €49.7 billion, 68% of which was for social care and health care spending.
“This level of spending reflects the significant resources allocated by the government to ensure that our health service has been able to respond effectively to the impacts of Covid-19, and has ensured that the necessary income and employment supports for our workers and businesses affected by Covid -19 are available,” he said.