‘Volatile’ corporation tax receipts plummet 45% in October

Corporation tax receipts plunged 45 per cent in October, with the sums collected from the tax on company profits sliding year-on-year for the third consecutive month.

The Government collected a total of €5.1 billion in tax in October, which was almost €1 billion or 16.4 per cent lower than the sum collected in the same month last year, the latest exchequer returns show.

The €1.3 billion in corporation tax receipts recorded last month was down €1.05 billion on October 2022, with the slump appearing to confirm that the exchequer’s period of bumper returns – which were gleaned from the profits of a small number of multinational companies – has come to an end for now.

The Department of Finance said the decline, which follows a 36 per cent year-on-year drop in August and a 12 per cent fall in September, underlined the volatility in this type of tax and reflected “the weakness of exports this year, particularly in the pharmaceutical sector”.

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Corporation tax receipts in 2023 to date are now trailing the figure recorded in the first 10 months of last year. At €15.7 billion they are €435 million or 2.7 per cent lower than in the same period in 2022.

Minister for Finance Michael McGrath said the returns “present a mixed picture” of the public finances, with higher income tax and VAT receipts this year demonstrating “the underlying strength of our economy”, but the fall in corporation tax receipts showing why it was important for the Government to avoid making permanent fiscal commitments on the basis of windfall revenues.

Peter Vale, a tax partner at Grant Thornton Ireland, described the figures as “stark”, and said the timing of the trend ahead of November, a critical month for corporation tax receipts, was “a further concern”.

A weaker corporation tax performance had been predicted by the Government amid signs that the earlier gains would not prove sustainable.

Mr McGrath and Minister for Public Expenditure Paschal Donohoe both warned ahead of last month’s budget that the State could not rely forever on the unexpectedly huge sums generated by the tax throughout 2022 and in the early months of this year.

However, the October drop appears to be bigger than was anticipated in figures published just last month, said Tom Woods, head of tax at KPMG. “The signs are pointing to a greater fall in planned receipts than even the revised projections estimated.”

Income tax receipts have held up much better, with €2.6 billion collected in October, up €59 million or 2.4 per cent on October 2022. In the year to date income tax receipts stand at €25.7 billion, up €1.8 million or 7.6 per cent on the same period last year.

“In the circumstances this is a strong performance and likely reflective of greater numbers in employment rather than wage inflation,” Mr Vale said.

Total tax receipts collected in the first 10 months reached €66.5 billion, up €2.5 billion or 4 per cent on 2022, with the gains driven primarily by income tax and VAT.

As October is not a due month for VAT, modest receipts of €243 million were recorded last month. In the year to date, VAT is running 10 per cent or almost €1.6 billion higher, with receipts totalling €17 billion.

The exchequer returns published on Friday show that a deficit of about €900 million was recorded for the first 10 months of 2023, which compares to surplus of €7.3 billion in the same period in 2022. The swing has been driven by factors including increased current expenditure, a fall in non-tax revenue and the transfer of €4 billion to the National Reserve Fund (NRF) in February.

Total Government expenditure in the first 10 months of 2023 arrived at €83.2 billion. Within this gross voted expenditure stood at €72.2 billion, up €5.6 billion or 8.5 per cent on the same period last year.

“This money is being utilised to provide key supports to our public services, supporting living standards and investing in infrastructure,” Mr Donohoe said.