Tax revenues drop by €1bn in October as corporation tax receipts disappoint again

Spotlight on multinationals as tax from corporations falls for third month

Spotlight remains on weakening corporation tax receipts.

The Government collected almost €1bn less in total tax revenues in October compared with the same month last year, as corporation tax receipts disappointed for the third month in a row.

The latest exchequer returns also suggest the consumer economy is in robust health, with Vat and income tax receipts increasing in the month, despite signs of slowing growth in the domestic economy. 

The figures are the first set of returns since Finance Minister Michael McGrath unveiled his giveaway budget last month. 

The Government and economists have for several months signalled out the weakness in corporation tax receipts which had boomed for many years, in particular during the pandemic that had boosted the revenues and profits of the large pharma and IT multinationals that have significant facilities here and pay large amounts in corporation taxes to the Irish exchequer.  

In the past, multinationals pay significant chunks of their their tax bills in the final few months of the year, starting in October.  

However, corporation tax revenues last month brought in only €1.3bn, which was down from the €2.3bn haul of October 2022. That means for the first 10 months, corporation tax receipts are running at over €15.7bn, down from the €16.2bn collected in the same period last year. 

The spotlight has remained on corporation tax receipts amid concerns the receipts are a sign of the weakness of the Irish economic model, which effectively means the multinationals fund large amounts of public spending.    

Investment funds

Mr McGrath last month advanced plans to set up two investment funds that will in part be funded from the exceptional levels of receipts paid by the multinationals.  

Income tax revenues last month brought in €2.6bn, only slightly higher than October 2022, but which means over the first 10 months, income taxes brought in €25.7bn, or €1.8bn more than collected in the same period last year.    

Vat receipts have brought in €17bn in the 10 months, up by €1.6bn more than was collected in the same period in 2022. October was, however, a non-Vat payment month. 

"While income tax and Vat remain steady, demonstrating the underlying strength of our economy, we have now seen corporation tax decline for a third consecutive month," Mr McGrath said in a commentary. 

“It is also why, in Budget 2024, I announced the establishment of two new long-term investment funds — the Future Ireland Fund and the Infrastructure Climate and Nature Fund — that will allow us to invest temporary ‘windfall’ corporation tax receipts to provide resources for known future fiscal challenges and ensure these receipts do not become part of the permanent expenditure base," the minister said. 

At €66.5bn in total tax receipts in the first 10 months, the Government has now collected  €2.5bn, or 4%, in revenues than in did in the same period last year.  

"October continued the trend seen in recent months for the exchequer, with a very mixed set of results on the tax receipts front, down over 16% on October last year," said Peter Vale, tax Partner at Grant Thornton Ireland. 

"Corporation tax continues to be of most concern," Mr Vale said. 

"A further concern is that we appear to be heading towards a weak November. As November is a critical month for corporation tax receipts, a weak November will have a significant impact on the expected full year 2023 budget surplus," he said.