Corporation tax topped €2.4bn - nearly €1bn more than Revenue had expected
The Exchequer deficit reached €5.3bn in June despite a surprise surge in the collection of corporation taxes from multinational firms based here.
The Department of Finance said corporation tax in June - typically the second-largest month for such receipts - topped €2.4bn. That is €62m higher than in the same month last year and nearly €1bn more than Revenue had expected.
It said this year's corporation tax haul was now running 41.2pc ahead of the first six months of 2019.
“The significant over-performance suggests that corporation tax may be somewhat insulated from the effects of the Covid-19 pandemic in comparison to other revenue streams, although it remains a highly volatile tax head,” the department said in a statement.
Finance Minister Paschal Donohoe said the State remains on course to record a 2020 deficit of anywhere from €23bn to €30bn – in part because it soon will boost Covid-19 supports by potentially billions more.
“A deficit of this scale is extraordinary, but we should continue on to the next phase of our response to this crisis,” he said.
“The Government is currently working on a fiscal stimulus plan that will, first and foremost, get people back to work. A package of measures will be introduced that will build on existing measures to help kick-start the economy, safeguard jobs and protect people’s livelihoods.”
The June deficit was driven almost entirely by higher spending to support Ireland’s virus-battered economy. However, it was €800m smaller than the deficit for May and more than €2bn lower than that recorded in April, when the surge in Government spending to combat Covid-19 disruption turned a planned 2020 surplus on its head.
The State’s total voted expenditure in the first half of this year reached €31.9bn, 27pc higher than in January-June 2019.
“We will continue to provide the funding needed to protect our public services,” said Minister for Public Expenditure and Reform Michael McGrath.
“Further resources will be needed in the period ahead to fund the essential stimulus measures as we work to repair and rebuild the Irish economy,” he said. “The challenge ahead is immense, but I have no doubt our economy can and will recover.”
Income tax in June also came in nearly €400m ahead of target at €1.4bn. Nonetheless, this was 21pc lower than a year ago.
“While income tax is experiencing a steep decline in annual terms, the drop in receipts has not been as severe as anticipated. This is an encouraging sign for future revenues as economic and social restrictions continue to be gradually loosened,” the Department of Finance said.
The State also received an exceptional windfall this month in non-tax revenue – a €2bn payment from the National Asset Management Agency. This sum is not set off against deficit spending but is expected to be tapped as part of the Government’s promised July stimulus.
Peter Vale, tax partner at Grant Thornton Ireland, said the unexpectedly mild drop off in income tax may "reflect the fact that lower-paid workers have suffered most as a result of Covid-19, with tax payments from higher earners propping up receipts".
While the fall in income is "less than expected", Mr Vale said, next month's Exchequer figures were expected to show a sharp drop in Vat receipts given the widespread closure of shops and hospitality firms since March.
While Vat collections were already down 20pc versus a year ago, he said, "worse is likely ahead".