July Exchequer returns and the impact of warehoused debt

Aug 10, 2020

Tax revenues for July fell by 18.6 per cent or €983 million on the same period last year. The fall is primarily driven by a decline in VAT receipts, but recently published figures show a substantial amount of VAT debt has been warehoused under the tax debt warehousing scheme.

Speaking to the Irish Independent earlier in the week Peter Vale, Chair of the CCAB-I Tax Committee, said:

"Given that there was evidence of an upturn in consumer spending in the last couple of months, it is difficult to gauge how much of today's drop in VAT receipts reflects declining consumer spending and how much reflects businesses preserving cashflow and electing to defer payments of VAT due."

More recently, Revenue confirmed that €1.9 billion of tax debt has been warehoused under the scheme to date, comprised of €1 billion of PAYE Employer debt and €898 million of VAT debt. VAT receipts to end-July are down by over €2.2 billion. This still reflects significantly reduced consumption levels, notwithstanding warehoused VAT amounts. 

Cumulatively tax revenues have decreased 2.5 per cent or €791 million, year-on-year. The fall in excise receipts to end-July accounts for €604 million of this cumulative decrease.

An Exchequer deficit of over €7.4 billion was recorded to end-July 2020. Minister for Finance, Paschal Donohoe TD, commented:

“A deficit of this magnitude underlines the extent of the fiscal challenge we face in placing the public finances on a sustainable and credible trajectory as the economy recovers”.

The €8.3 billion year-on-year deterioration is primarily driven by increased voted current and capital expenditure. Total net voted expenditure to end-July amounted to just over €38 billion. The “extraordinary increase” in public expenditure; up 30 per cent on last year, was attributed to “the Government’s commitment to supporting our health service and wider economy”, by the Minister.

Further details on the July Exchequer returns can be found on the Department of Finance website