Vat spending haul to help Government fund Covid stimulus pledges

Minister for Finance Paschal Donohoe TD at the Department of Finance. The exchequer collected over €7.5bn in tax revenues in the month of May,  which was ahead of the department's own targets. Picture: Gareth Chaney/Collins

The Government looks set to comfortably fund the billions it says it will inject into the economy under its Covid stimulus package, as three of its four main sources of tax revenue rose sharply in May.  

The latest exchequer figures again reflected the remarkable recovery for Ireland from the global health crisis as tax revenues boomed even before major parts of the consumer economy such as hospitality have fully reopened. 

A surge in Vat, income taxes, and excise duties helped drive Government revenues.            

The exchequer collected over €7.5bn in tax revenues in the month of May, up by over €1.3bn from May 2020 when the first of the Covid lockdowns was just beginning to come to an end. The May figures were also ahead of the Department of Finance's own targets.

The Government has now taken in almost €23.7bn in the first five months of the year, an increase of almost €2bn over the same period last year. 

Vat receipts surged by 53% to almost €2.3bn from May 2020, as more parts of the economy were freed of the Covid health restricstions. Over the five months, Vat receipts at almost €7bn are €1.2bn ahead of the amount collected in the same period last year.          

The figures will boost expectations that the unwinding of some of the almost €15bn in additional deposits built up by households during the pandemic will help support the recovery, when restrictions have been fully lifted through the summer. 

Income tax revenues continued to boom despite the pandemic. The exchequer collected €2.1bn in income tax revenues, up by €553m from May 2020, and over the five months raised a total of €10.1bn, an increase of €1bn. 

Excise duties brought in €412m in the month and €2.1bn since the start of the year, an increase of €206m. 

At over €2.3bn, corporation tax revenue was the only one of the four major tax heads to bring in less than May 2020.  

Corporation tax receipts have, however, exceeded expectations for a number of years and many experts see the receipts at least matching last year's haul of €11.8bn when major companies have paid up their tax bills by the end of the year.                        

Over the slump                   

Economists have said that the economy is showing signs of having weathered the Covid slump.

"With non-essential retail having now re-opened, Vat receipts are likely to rise sharply in the second half of the year," Peter Vale, tax partner at Grant Thornton Ireland said.  

"While consumers will likely remain cautious, with high savings levels, Vat receipts for the year will be significantly ahead of both last year and target, providing another surplus for the Minister," Mr Vale said. 

The Department of Finance said the exchequer deficit for the five months to the end of May was running at €6bn -- little changed from the same period last year -- and was running at €12.2bn on a 12 month rolling basis. 

Finance Minister Paschal Donohoe said that "a sustainable and broad based recovery" was underway. 

Michael McGrath, Expenditure Minister, said that over a 12 month rolling basis that total gross spending was running at €86.7bn, up by €14bn from the previous period.