The latest data reveals that corporation tax receipts for the current year have reached €12.7bn, marking a 7.3% increase compared to the first eight months of 2022. This places corporation tax as the third-largest revenue source, following income tax and VAT.
However, the decline in corporation tax exceeded expectations, highlighting the remarkable volatility in this area of taxation, according to the Department of Finance’s end-August Exchequer Returns.
The Exchequer contributes approximately 75% of total government spending and revenue.
The decrease in corporation tax, along with a dip in capital and customs taxes, resulted in a 16.6% decrease in tax receipts for August compared to the same month last year, totaling €5.3bn. Corporation tax accounted for €1.8bn, or roughly a third, of that amount.
Nevertheless, not all tax sectors experienced a decline in the same month.
Income tax increased compared to August of the previous year, while VAT remained consistent with the levels from August 2022, as indicated by the Exchequer Returns.
Overall tax revenue for this year is 6.6% higher than the same period in 2022, totaling €53.1bn. Corporation tax contributes to just under a quarter of all receipts.
During the current year, €20.7bn has been collected from income tax, an 8.2% increase compared to the same period last year. VAT receipts until the end of August amounted to €13.5bn, representing an 11.2% increase compared to the previous year, demonstrating the stability of consumer spending.
However, customs receipts for the current year have decreased by 9.3% to €360m, reflecting a decline in global and Irish trade.
Non-tax revenue until the end of August, which includes €0.6bn earned from the sale of State shares in AIB, Permanent TSB, and Bank of Ireland, fell by €1bn compared to the previous year due to lower Central Bank surplus income and the timing of Nama’s surplus income payment.
Total expenditure for the year amounted to €66.4bn, with gross voted expenditure, which is approved by the Dáil, reaching €56.4bn, a 9.5% increase compared to the previous year.
Higher spending, the decrease in corporation tax, and a one-off transfer to the national reserve fund resulted in a small deficit of €0.3bn for the first eight months of the year, until the end of August.
On a 12-month rolling basis, which provides a more accurate representation of the State’s finances, the Exchequer recorded a deficit of €1.6bn.
Based on the data available, the Government is still projected to achieve a significant Exchequer surplus of approximately €10bn this year. However, the Department of Finance estimates that the “underlying” deficit, which excludes excess corporation tax receipts, amounts to €8bn for the current year.
Finance Minister Michael McGrath is considering the specifications and size of two new funds to house excess corporation tax receipts. These funds include a counter-cyclical infrastructure investment fund and a longer-term sovereign wealth fund designed to support future pension payments.
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