Income tax and VAT receipts surprisingly strong in first four months of year

Tax receipts ahead by 4.2%, latest exchequer figures show

The Minister for Finance, Paschal Donohoe. Photograph: Alan Betson

The Minister for Finance, Paschal Donohoe. Photograph: Alan Betson

 

The public finances were €12.5 billion in the red last month as spending on pandemic-related supports stayed high.

The fiscal fallout from the pandemic was, however, limited by stronger-than-expected income tax and VAT receipts, suggesting businesses and consumers have become more resilient.

The latest exchequer returns, published by the Department of Finance, show the Government’s budget deficit – on a rolling 12-month basis – was €12.47 billion in April.

Tax receipts for the first four months of the year were €16.1 billion, up €652 million, or 4.2 per cent, on the same period last year.

“While the base effect of the first lockdown last year is a key factor in the year-on-year increase, the out-turn versus profile and the trend in both income tax and excise duties over the last six months point to strong fundamentals,” the department said.

Despite the persistently high level of joblessness, income tax receipts were nearly €8 billion for the period, which was €469 million, or 6.2 per cent, higher than the same period last year, reflecting the impact of Government supports.

VAT receipts, an indicator of consumer spending, were €4.68 billion for the four-month period and 10.9 per cent higher year-on-year, while excise duty receipts were up 6 per cent at €1.7 billion.

April is traditionally not a strong month for corporation tax. Receipts from the business tax were down €330 million on last year , which was primarily attributable to the €290 million withheld to make payments under the Government’s the Covid Restrictions Support Scheme (CRSS), which is designed to help businesses curtailed from trading normally.

Government spending for the period was €26.7 billion, €2.2 billion or 9.1 per cent ahead on the same period in 2020, mainly due to the cost of the Pandemic Unemployment Payment (PUP) and the Employee Wage Subsidy Scheme (EWSS).

Continuing impact

“Today’s figures show the continuing impact of the pandemic on our public finances. We continue to borrow heavily on a monthly basis to support incomes and businesses through the pandemic,” the Minister for Finance Paschal Donohoe said.

“While the cost to the Exchequer has been substantial, today’s figures also show some of the underlying strengths in our economy with income taxes and excise duties, in particular, continuing to perform well,” he said.

“ The flexibility and adaptability shown by employers and employees throughout this pandemic has been extraordinary. Today’s figures suggest that as the economy opens up they can look forward to brighter days and a sustained recovery ahead,” Mr Donohoe said.

Minister for Public Expenditure and Reform, Michael McGrath noted that with a prolonged period of restrictions to fight the pandemic, Government expenditure has reached nearly €27 billion for the first four months of the year.

This is over €2 billion higher than for the same period last year and just under €800 million ahead of profile, he said.

“Thankfully, however, we now can see light at the end of the tunnel. The vaccination programme is continuing at a more impressive pace as supplies have accelerated,” he said, noting, that last Friday a record 44,000 vaccines were administered in one day.