Income and excise tax haul point to 'quick rebound' from Covid-19 slump     

Finance Minister Paschal Donohoe played down the strength of the tax figures, saying that while the income and excise tax sources continued to perform, that the 'cost to the exchequer has been substantial' from the crisis. Picture: Gareth Chaney/Collins

A large rise in the income tax and excise revenues – even before the economy fully reopens – is pointing to a quick rebound from the Covid-19 slump, new figures indicate.  

The April exchequer returns show the Government collected €16.1bn overall tax revenues during the first four months of the year – up by more than €650m from a year ago– despite the huge numbers of people who are still relying on some sort of welfare  payment to make ends meet during the lockdown.  

Income tax receipts were again a star performer, with receipts up by €470m in the year to almost €8bn. Excise duties, which rose by €100m to almost €1.7bn over the same period, also helped the revenue haul.

Timely snapshot

Ireland's monthly exchequer revenues are highly significant for providing a timely snapshot of the state of the recovery. 

The latest figures reinforce earlier evidence that the economy is recovering much faster than many expected. A key survey earlier this week showed Irish factories are facing "boom" conditions and struggling to keep up with global export orders. 

The April exchequer figures were "spectacular" given the large sections of the economy that are still locked down, said Fergal O'Brien, director of policy and public affairs at business group Ibec. "They bode well for a quick rebound once all the restrictions are lifted," he said. 

Behind the figures has been the resilience of income tax receipts, reflecting in part the €12bn the Government has so far injected into households under the pandemic unemployment payments and wage-subsidy schemes since the onset of the Covid crisis last spring. 

At the same time, pharma, medical device, and IT multinationals have been expanding, and not contracting, during the pandemic and paying more in wages and therefore contributing to the Government's income tax receipts.

"The income tax figures again stood out," said Peter Vale, tax partner at Grant Thornton.

"With the economy gradually reopening, we can expect income tax receipts to remain resilient for the rest of the year. Indeed, income tax looks set to provide an unexpected surplus by year-end." 

Finance Minister Paschal Donohoe played down the strength of the figures, saying that while the income and excise tax sources continued to perform, that the "cost to the exchequer has been substantial" from the crisis. 

Exchequer deficit

Mr Donohoe and Expenditure Minister Michael McGrath instead highlighted the €2.3bn increase in spending by the Department of Social Protection on income supports, as well as an exchequer deficit running at €12.5bn for the latest 12 months. At €26.7bn, overall voted spending in the first four months was up €2.2bn from a year earlier. 

However, Mr O'Brien at Ibec said the exchequer figures should bolster confidence for the ministers to continue to fund household and business supports for as long as they were needed. 

"But it should also boost confidence to fund the ambitious investment plans that the country needs," he said, citing the National Economic Plan and the National Development Plan.