Income tax revenues close to matching 2019 levels despite Covid-19 pandemic hit

Exchequer figures published later Tuesday will show that income tax revenues for the year have come close to matching 2019 levels, despite the huge spike in unemployment amid the Covid-19 pandemic, the Irish Examiner understands.  

The State collected more than €22.9bn in income tax revenues in 2019 and was braced at the start of the crisis for a huge slide in what is its single largest revenue source as the economy reeled under the pandemic last March.   

However, the December figures will show that after extended deadlines for payments, income taxes paid by the self-employed have gone a long way to making up a running shortfall for all income tax receipts earlier in 2020.              

The tax revenue figures will confirm that corporation tax, which contributed almost €10.9n to the State's coffers in 2019, have brought in a further record revenue haul last year.             

Taken together, the better-than-expected outturn for income tax revenues and the record corporation tax receipts will go part of the way in offsetting the huge increases in spending on health and social protection entailed in fighting the pandemic and in covering the costs that the lockdowns pose.   

Boost for borrowing

The momentum behind the figures will boost hopes the Government will undershoot the €18bn to €19bn it was due to borrow from markets in 2021, though the cost of such funds is currently close to zero.      

That could potentially lower the total costs for the State of the pandemic in terms of additional borrowings to below €40bn over the two years. 

The relative resilience of income tax receipts has surprised many economists and has helped the Irish economy to escape the sharp economic downturn as suffered by other European economies since the onset of the crisis last spring.

However, the cost of the successive lockdowns has fallen unevenly across households and come at a high cost for many people working in hospitality and retail, even as the public sector and multinationals hired additional staff.

Before the latest lockdown, there were 277,700 on the pandemic unemployment payments, or PUP, with many of those people working in hospitality and retail.     

The multinationals, and pharma companies, in particular, have boomed during the pandemic, which has meant that many of the foreign-owned firms have paid more in corporation tax to the Irish exchequer on those higher gross profits.

On Tuesday, the Government will also reveal the exchequer deficit for 2020, which will provide some sort of insight into the potential 2020 government deficit, when the official figures are reported to Eurostat and the European Commission this spring.   

On the spending side, the figures will have the last word on the spending on health and social protection in the first year of the Covid crisis. 

For the 11 months to the end of November, the Government had already spent more than €15.7bn on social protection, up almost 60% on the same period in 2019. It had also spent  €17.8bn on healthcare, an increase of over 9% over the same period.