Corporate tax yield jumps 70% since the start of the year

New Treasury figures show tax receipts at the end of September rose 26% year-on-year to €57.9 billion, although the government has insisted the annual comparison is flattered by its tax lockdowns. Covid in the first months of 2021.

Corporation tax revenues amounted to 13.8 billion euros at the end of September, a huge annual increase of 70%.

The Ministry of Finance commented: “The annual increase in corporate tax reflects the continued strong momentum of activity in the multinational sector.

Corporation tax revenue of €2 billion was collected in September, up nearly €1 billion from the same period last month.

“This increase relates primarily to payments made this year from 2021 profits and therefore should not be carried over to 2023 revenues,” the ministry said, without a rational explanation.

Minister of Finances Pascal Donohoe (illustrated) insisted that the strength of “potentially volatile” tax revenues gives “an artificially positive image” of public finances.

“These revenues are highly concentrated in a small number of companies and as such are subject to extreme potential volatility and cannot be guaranteed at current levels in the future,” he said.

The minister added that department officials believe that “excess” corporate tax revenue – that is, the amount that cannot be explained by the underlying factors – could amount to some share in the region between 8 and 10 billion euros for 2022.

“If these ‘windfall’ revenues were excluded, a large deficit would be in prospect this year,” Donohoe said.

“In order to rebuild our budgetary reserves, we will begin to replenish the National Reserve Fund with some of this excess revenue. This year, 2 billion euros will be directed to the Fund. Next year, 4 billion euros will be transferred.

Income tax revenues at the end of September amounted to €21.4 billion, up 16% on an annual basis.

Pierre ValeGrant Thornton’s tax partner, observed: “What will arguably please the government most is that despite evidence of a slowdown in hiring in the tech sector in particular, the tax figures earnings for September remain strong, 15% ahead of the same month in 2021.”

Increase in VAT receipts too

VAT revenues at the end of September were 15.3 billion euros, up nearly 23% on an annual basis and 24% compared to the same period in 2019 before the pandemic.

The VAT result will dismay businesses in the tourism and hospitality sector who have been told that the rate of sales tax levied on their turnover will increase by 50% from 9.0% to 13 .5% from March 2023.

Tom Woodshead of tax at KPMG, said that despite declining consumer confidence, VAT receipts appear to be benefiting from price inflation.

Peter Vale added: “While there were previously signs of stabilization in VAT figures, figures today show that consumer spending remains strong, with figures for the month of 19% before September 2021. Given the uncertain economic environment and rising interest rates, this is quite remarkable.”

Capital gains tax revenues also remain strong, with €590 million collected by Revenue over the first nine months of 2022 compared to €330 million over the corresponding period in 2021.

At 4 billion euros at the end of September, excise duty revenues decreased by 2% on an annual basis. The decline reflects a reduction in fuel excise duties to protect motorists from rising gasoline and diesel prices.

A Treasury surplus of 7.9 billion euros was recorded at the end of September. This is the amount of excess government revenue over its spending, and shows why the measures in Budget 2023 broke with recent precedent.

Total voted gross spending at the end of September was 59.2 billion euros, down 2.4% year-on-year due to the end of Covid supports.

Gross voted current expenditure was €850 million ahead of what was forecast when the 2022 budget was drawn up a year ago, due to higher than expected Covid-related expenditure this year and associated costs accommodation for Ukrainian refugees.