Corporation tax receipts drop nearly 25% as expenditure rises

Ireland recorded a €300m exchequer surplus for first quarter due to higher income tax and Vat receipts

Thu, 04 Apr, 2024 - 19:26

Ronan Smyth

A near 25% drop in corporation tax receipts in the first three months of the year and increases in State spending have been offset by stronger Vat and income tax receipts, the latest exchequer returns show.

According to the Department of Finance, between January and March, a surplus of €300m was recorded with total tax receipts amounting to €20.1bn. While it is an improvement on the €2.1bn deficit recorded during the same period in 2023. this is largely due a transfer of €4bn to the National Reserve Fund at the time.

The returns show that the exchequer took in €7.9bn from income tax — an increase of 7.6%, or €559m, year-on-year which reflects the strength of the labour market.

Vat accounted for €7.1bn, an increase of 5.4% or €364m, while excise receipts increased by €183m to €1.4bn.

However, corporation tax receipts fell 24.8%, or €805m, to 2.4bn due to a sharp decline in March.

While the drop in corporation tax is significant, Finance Minister Michael McGrath played it down, saying the decline in March was due to a “technical factor” relating to the timing of some large payments.

“We believe it is likely to be made up later in the year. In other words, the March decline does not suggest that at least at this early stage, that corporate tax performance would differ significantly from what we set out on budget day last October,” Mr McGrath said.

The Department of Finance remains confident that it remains on track to taken in around €24.5bn in corporation tax this year but it could not say when it expects these large payments to come through.

The drop in corporation tax receipts comes after the Government published details of the Future Ireland Fund and Infrastructure, Climate and Nature Fund Bill 2024 which will establish two investment funds into which excess corporation tax receipts will be funnelled.

In addition to the tax take, non-tax revenue amounted to €1.2bn while appropriations-in-aid of €4.4bn brought total other revenue to €5.6bn. All this brought total gross Government revenue to €25.7bn.

Total Government expenditure between January and March amounted to €25.4bn.

According to the figures, total gross voted expenditure amounted to €22.8bn which is 14.9% higher compared to last year but the Department of Public Expenditure maintains that this is in line with profile.

Current expenditure accounted for €21bn of that expenditure which is 12.9% ahead of last year and 1.3% “ahead of profile”.

Specific departments, particularly health and social protection, are reporting significant pressures with current expenditure.

The Department of Public Expenditure and Reform said this signals the need for all departments to manage spending and to stay within profile.

Public Expenditure Minister Paschal Donohoe said the Department of Social Protection has seen the largest level of spending growth this year which he attributed to additional cost-of-living support to social welfare recipients paid out in January.

“We need to continue to work during the year to bring spending in line with the commitments that were made on budget day,” Mr Donohoe said.

The returns also show that the exchequer spent €1.7bn so far this year servicing debt, which is €300m less than last year.