Huge rise in corporation tax revenues help lift lingering concerns on Budget outlook

Increases across the Big Three tax sources of income, corporation tax, and for Vat payments in a non-payments month, meant the Exchequer collected almost €1bn more in receipts than it did in the same month last year. 

The Government collected a record €7.8bn in tax receipts in June, driven by a huge rise in corporation tax receipts, and helping to lift lingering doubts about the strength of the public finances ahead the Budget.

Increases across the Big Three tax sources of income, corporation tax, and for Vat payments in a non-payments month, meant the Exchequer collected almost €1bn more in receipts than it did in the same month last year. 

The figures reflect the strength of the Irish economy and means that the Irish Exchequer is one of the richest in Europe during the cost-of-living crisis.  

At almost €4.3bn, corporation tax receipts were a star performer in the month, with the single tax head accounting for an increase in revenues of over 19% from June last year.  

That outcome may help ease some concerns, although worries will continue about the fortunes of the Irish public finances being tied to the many billions of euro paid in corporation taxes by a small handful of mainly US pharma and tech giants. 

The Economic and Social Research Institute said last week it was looking closely at the slowdown of exports by the Irish-based pharma giants in recent months in case it was a trend that would in time affect the amounts of corporation tax the companies pay the Irish Exchequer. The ESRI said, however, there was no sign of pharma companies cutting employment levels in Ireland. 

Income taxes brought in €2.5bn in the month, an increase of 6% from June 2022, reflecting high employment and low unemployment levels, despite the economy facing successive waves of crises from the fall-out of the pandemic, inflation, rising interest rates, and a slowing world economy that appears to be weighing on the exports of Irish-based manufacturing. 

'Very reassuring'

"The corporation tax figures are very reassuring," said Conall Mac Coille, chief economist at Davy. "They suggest that the budget surplus this year will be higher than the Government is forecasting this year," Mr Mac Coille said.  

There might have been concerns about the slowdown in corporation tax receipts, but "those fears may be assuaged" by the June exchequer figures, he said. 

For the first six months, the Government collected a total of €41bn in tax revenues, some €4bn or 11% more than collected in the same period last year, with corporation taxes and Vat revenues, in particular, performing very strongly.      

Vat brought in a total of €10.3bn in revenues in the first half, an increase of 13.5% from the same period in 2022, while corporation tax receipts climbed 20% to €10.5bn, again underlining the increasingly important role company tax on multinationals is playing in the composition of the Irish public finances. 

Excise duties, which were once a prominent tax source, brought in a total of €2.6bn in the first six months, unchanged from last year. 

The Department of Finance said that it posted an Exchequer surplus of €300m at the end of the first half, which compares with the surplus of €4.2bn last year, but only after a payment of €4bn was made into the National Reserve Fund in February.