State’s tax receipts surge to record €62bn as economy rebounds

Government tax receipts have surged to record levels fuelled by stronger-than-expected consumer spending, employment and corporate profits.

The latest exchequer returns for November show the Government has collected €62.3 billion in tax so far this year, €5.3 billion more than expected.

The 11-month total exceeded the €57 billion in tax receipts generated for the full year last year, and represents that largest annual tax haul to date.

The returns were buoyed by a strong recovery in income tax and VAT receipts linked to the reopening of the economy and another surge in corporation tax.

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November is generally the most important month of the year for tax as it coincides with the deadline for self-employed income tax payments and typically sees the biggest inflow of corporation tax. It is also a VAT-due month.

The business tax generated a record €4 billion in November alone. A Department of Finance spokesman said “pharma and big tech were the main contributors”.

Cumulatively corporation tax receipts are now running at €13.5 billion for the year, €2.8 billion or 25.8 per cent above official expectations.

The latest returns come as the State signs up to an OECD-brokered deal on tax which will effectively end the prized 12.5 per cent rate.

They show VAT netted the exchequer €15.2 billion (€1 billion ahead of target), most of it since the lifting of restrictions in May.

The sales tax is one of the strongest indicators of the pick-up in consumer activity.

Income tax, meanwhile, generated €24.4 billion (€1 billion above profile), a reflection of the stronger-than-expected recovery in employment. Figures on Wednesday showed the State’s jobless rate fell to a pandemic low of 6.9 per cent last month.

Positive indicator

Minister for Finance Paschal Donohoe said the latest returns offered "another positive indicator as to the strength of our economic recovery over recent months".

“VAT receipts in particular reflect the significant rebound in consumer spending, while the income tax performance reflects the ongoing recovery in the labour market; indeed, figures published last week show that the level of employment is now back at pre-pandemic levels, though this varies across sectors,” he said.

“Corporation tax receipts in November were very strong, reflective of a very robust performance of many higher-technology sectors during the pandemic,” he added.

However, Labour’s finance spokesman Ged Nash – while welcoming the figures – queried the department’s forecasting, claiming it was “so far off the mark and that it mitigated against proper planning and resource-use and planning in the public finance” .

The higher tax take pushed the deficit – on a 12-month rolling basis – down to €4.9 billion in November.

Spending

On the spending side, total expenditure to the end of November amounted to €74.7 billion. This was almost €2.6 billion or 3.4 per cent below profile as a result of an “underspend” across several departments.

Minister for Public Expenditure and Reform Michael McGrath said nearly 82 per cent of the spending total, some €55.9 billion, related to spending in the frontline departments of education, social protection, health, and the Department of Further and Higher Education, Research, Innovation and Science.

“This spending 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.