Corporation tax revenues will again likely make an outsized contribution to overall tax revenues this year, providing the Government with some sort of comfort that it can meet its hefty spending commitments in the short term.
The latest monthly exchequer returns show that revenues from corporation taxes surged in October and brought in almost €6.9bn for the exchequer over the 10 months and contributed €660m more to the coffers than was anticipated at this stage of the year.
The Government had estimated that corporation tax receipts, which had already brought in a record haul last year, would fall back in 2019 but there is every sign that the opposite will be the case.
Large amounts of corporation tax revenues are collected in the last few months of the year and there is no reason to believe that the 2019 haul will not set a new record.
“At this stage, it wouldn’t be a surprise if figures for the full year were €1bn ahead of last year,” said Grant Thornton tax partner Peter Vale.
“This is somewhat remarkable given that the minister had originally signalled that 2019 receipts would be behind what was an exceptional 2018,” he said.
The revenues from corporation tax helped push revenues from all tax sources to over €44.9bn for the 10 months to the end of October, an increase of 6.7% from a year earlier.
On the expenditure side, total net voted expenditure of €43.2bn at the 10-month stage was up 7.7% from the same period last year.
The Department of Finance said that the overall voted spending increase included a 6% increase in current spending and a rise of almost 24% in capital spending.
The Economic and Social Research Institute, and budget watchdog, the Irish Fiscal Advisory Council, have previously warned the Government against relying on record corporation tax receipts to make spending commitments.
The council earlier this year said the Government could consider funding a so-called prudence account, saying that it estimated the Government took up to €6bn in recent years in unanticipated corporation tax receipts.
A large chunk of the revenues came from a small number of multinationals, and was not generated from the domestic economy, the watchdog said.
However, Austin Hughes, chief economist at KBC Bank, said there were signs that may suggest that corporate tax revenues will continue to deliver for some time, and their use cannot be shunted aside, at a time of housing and other urgent spending needs.
“The debate on corporation tax will become more pressing especially in the run-up to an election when the discussion may not be as grown up as one may like it to be,” Mr Hughes said.
He said that the €12.5bn the exchequer collected from Vat receipts over the first 10 months pointed to some reluctance by consumers to spend, despite the growing economy.
Income taxes brought in almost €17.6bn in the first 10 months, an increase of over 8% from the same period in 2018.
Meanwhile, figures suggested Brexit and the world trade disputes have weighed on Irish factories.
The CSO said that manufacturing output fell 0.5% in the three months to the end of September than the previous three months.