€2bn surge in corporation tax puts Government on course for record tax haul

The Government is on course for another record tax haul this year as a result of several large, unscheduled corporation tax payments from multinationals in the life sciences sector.

The latest exchequer returns for October were also buoyed by a sharp rebound in VAT linked to the reopening of the economy and a pick-up consumer spending.

They show the Government has collected €50.9 billion in tax so far this year, €3.8 billion or 8 per cent more than it had anticipated and nearly 20 per cent more than this time last year.

Performance

The strong performance was driven by corporation tax, which generated €9.5 billion for the 10-month period, €2 billion more than the Government’s initial target. Business tax receipts in October alone were nearly a €1 billion above profile.

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The Department of Finance said the over-performance was due to larger-than-profiled payments from the life sciences sector. It included the €297 million settlement of the record €1.64 billion tax bill assessed against drug company Perrigo.

“It is not expected that such a high level of receipts will be repeated in future years,” it said.

The buoyant figures come as Ireland signs up to the OECD-brokered deal on tax, endorsed by G20 leaders at the weekend, which will ensure big companies pay a minimum tax rate of 15 per cent, a move than effectively ends Ireland’s prized 12.5 per cent rate.

“Corporation tax receipts in October were higher than expected, once again illustrating the inherent unpredictability and volatility of this revenue stream,” Minister for Finance Paschal Donohoe said.

“ Despite the further clarity that now exists with international tax reform, there is still a high level of uncertainty in relation to its impact on Ireland,” he said.

“The best form of defense against any negative impact is to have strong and stable public finances,” Mr Donohoe said.

The exchequer numbers show VAT netted the exchequer €12.6 billion (€785 million above profile), most of it since the lifting of restrictions in May.

Income tax, meanwhile, generated €20.6 billion (€484 million above profile), a reflection of the stronger-than-expected recovery in employment.

On a 12-month rolling basis, the exchequer recorded a deficit of €8 billion in October.

On the spending side, total expenditure to the end of October amounted to €67.5 billion. This was almost €2.4 billion or 3.5 per cent below profile as a result of an “underspend” across several departments.

“The underspend vis-a-vis profile is the result of a number of factors including the closure of construction sites earlier in the year,” the department said.

Minister for Public Expenditure Michael McGrath that 82 per cent of expenditure, some €51.1 billion, related to spending in the Departments of Education, Social Protection, Health, and Further and Higher Education, Research, Innovation and Science. “This reflects the Government’s continued focus on protecting the most vulnerable in society and prioritising core social services against the impacts of Covid-19,” he said.