Government collects another €1bn corporate tax windfall in March

Another surge in corporation tax receipts has put the Government on course to exceed its budgetary targets for the year.

The latest exchequer returns show the Government collected €3.2 billion in receipts from the business tax in the first quarter of 2023, €1.3 billion higher than in the same period last year. Corporation tax receipts for March alone amounted to €2.6 billion, €1 billion higher than the same month last year.

“While subject to some uncertainty, preliminary indications suggest that this may reflect, in part, a timing issue – ie the earlier payment of receipts,” the Department of Finance said.

Corporation tax receipts amounted to a record €22.6 billion last year, nearly 50 per cent higher than the previous year, making it the second largest tax revenue stream for the Government. However, the department estimates that more than €10 billion of this total is “windfall” and therefore cannot be relied on into the future.

As Copenhagen has its ‘Notre Dame moment’, Danes vow that dragon-tail spire will rise from the ashes

---

McGrath’s difficult communications strategy on State finances

---

Trinity Business School dean: ‘AI brings a huge threat to people’s ability to learn and to upskill’

---

We must do more to welcome Irish people returning home

---

On the basis of the latest exchequer numbers, the Department of Finance’s chief economist John McCarthy said that “in the absence of any shock to the economy” last year’s record total and the Government’s forecast for corporation tax this year will almost certainly be exceeded.

It is estimated that €1 in every €8 collected by the State now comes from just 10 big companies.

[ Ireland set to avoid implementing 15% headline corporate tax rate ]

Goodbody Stockbrokers recently warned that lower corporate tax receipts linked to a decline in profits across the tech sector could pose more of a risk to the Irish economy than the recent spate of job losses in the sector.

Responding to the latest figures, Minister for Finance Michael McGrath said: “Once again, corporate tax receipts have surprised on the upside, though my officials estimate is that around half of the corporate tax take is unlikely to be permanent.

“It is, of course, essential that windfall corporation tax receipts are not used to fund permanent expenditure. This is why I transferred €4 billion to the National Reserve Fund (NRF) in February: there is now €6 billion in the fund,” he said.

He said he would bring plans for a new longer-term savings vehicle to meet the costs of an ageing population and other pressures to Cabinet in the coming weeks.

The latest exchequer data show the Government collected €19.7 billion in tax receipts across all the headings in the first quarter of 2023, €2.5 billion or 15 per cent up on last year.

'We have a lot of eggs in few baskets' - does the positive outlook conceal threats to our economy?

Listen | 34:53

This strong performance was driven mainly by corporation tax, income tax and VAT.

Income tax generated €7.4 billion for the three-month period, €560 million or 8.1 per cent up on the same period last year, reflecting the current strength of the labour market.

VAT receipts in the first quarter totalled €6.8 billion, €900 million (16 per cent) more than in the same quarter last year.

The department said the year-on-year comparison was slightly skewed by some €200 million in receipts that had been withheld to fund potential repayments late last year.

[ Cut in North’s corporation tax looking increasingly unlikely ]

Overall, an exchequer deficit of €2.1 billion was recorded in the first quarter compared to a surplus of €200 million in the same period last year. The difference was driven by the transfer of €4 billion to the National Reserve Fund (NRF) in February, the department said.

Tom Woods, head of tax at KPMG, said the strength of corporate tax “further underscores the strength and importance of FDI to the economy”.

Total spending for the three-month period came to €26.9 billion. Of this, gross voted expenditure stood at €19.8 billion, which was €900 million (4.9 per cent) in advance of the same period last year.