Ireland’s tax take stable despite #Coronavirus lockdown, future unclear

Ireland’s tax take has been broadly stable so far this year as bumper corporate tax returns and greater than expected resilience in income tax and VAT receipts staved off a forecast collapse because of the coronavirus pandemic, write Conor Humphries and Padraic Halpin.

Ireland had expected its tax take for the year to be almost 10% or 2.1 billion euros lower year-on-year by the end of May when it published revised figures taking account of the shutdown.

Data on Wednesday showed it was just 8 million euros lower.

The finance department cited evidence showing job losses because of the lockdown were concentrated in sectors with lower average wages and higher proportions of part-time staff, many of whom are largely outside the income tax base.

But Finance Minister Paschal Donohoe said it was too early to extrapolate a trajectory for this year’s public finances from the May data alone.

“For now, that’s all it is. It’s a signal,” Donohoe told a news conference.

Wednesday’s data showed smaller than anticipated falls in income tax and VAT receipts and the €2.6 billion returned in corporate taxes in May compared to the €1.6bn forecast for what is typically the second largest month for corporate tax returns with 15% of the total year’s take due.

The state collected €1.6bn of income tax in May, down 7.8% year-on-year but above the €1bn forecast for the first month when returns reflected that 26% of the labour force was temporarily or permanently unemployed.

VAT receipts fell 35.4% year-on-year in May, but also exceeded the revised expectations by more than 50%.

With government spending 19% or 4.2 billion euros ahead of its original target, the state posted a 6.1 billion euro budget deficit at the end of May. A deficit between 7.4% and 10% of GDP is forecast for 2020.

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