The Republic’s corporation tax bonanza continued in September as receipts for the month of €2 billion were double those of the same month last year, according to the latest set of exchequer returns.
The third-quarter exchequer returns also show that the Government has raised €958 million so far this year selling shares in Bank of Ireland, from which it has now fully exited, and AIB, where the State is the majority shareholder with a stake of about 63.5 per cent.
The returns show the State reaped a total of €13.8 billion in corporation taxes over the first nine months of the year, up €5.8 billion or more than 70 per cent on the same period last year.
The boom in corporation tax receipts, along with steep rises in income tax and VAT, helped to boost the State’s fiscal surplus to €7.9 billion for the first nine months of the year, compared to a €6.2 billion deficit last year. On a rolling 12-month basis, the surplus was €6.8 billion.
The State is now on course to post only its fourth budget surplus in the last 15 years. Most of the rolling surplus is set to be wiped out by the end of the year, however, with about €4 billion in one-off budget measures to cushion people and businesses against energy prices rises. A further €2 billion is due to be put into the State’s National Reserve Fund. John McCarthy, the chief economist of the Department of Finance, confirmed that the final budget surplus for 2022 is expected to be about €300 million.
Total tax revenues rose by more than 26 per cent over the nine months to €57.9 billion, while the State’s total gross revenues were up 12 per cent to €75.9 billion. The Government had spent a total of €68 billion by the end of September. While corporation tax receipts doubled last month, income tax was also up by 15 per cent to €2.2 billion, while VAT receipts were up by about one-fifth.
Mr McCarthy said the strong recovery in the income tax figure was the “most important” number in the returns, as it indicates that there are no lasting “scarring effects” on the labour market from the Covid-19 pandemic.
He said the department does not know when the boom in corporation tax revenues will end, although he said State officials had noted recent profit warnings from companies such as Facebook, which is among the State’s top 10 biggest sources of corporation tax due to its international headquarters being located here.
“The strength of potentially volatile corporation tax receipts provides an artificially positive picture of the public finances,” said Paschal Donohoe, the Minister of Finance. “These receipts are highly concentrated among a small number of companies and, as such, are subject to extreme potential volatility and cannot be guaranteed at current levels into the future.”
He said the department has modelled that between €8 billion and €10 billion of the State’s estimated €21 billion of corporate tax revenues for 2022 could be at risk of a “shock” in future years.
“If these ‘windfall’ receipts were excluded, a significant deficit would be in prospect this year,” said Mr Donohoe.