Vulnerabilities in public finances reflected in fall in monthly corporation tax

The Department of Finance has published the Fiscal Monitor incorporating the Exchequer Statement for August 2023. Tax receipts to end-August were €53.1 billion, up €3.3 billion, or 6.6 percent on an annual basis.  

Income tax receipts remained robust at €20.7 billion to end-August, up 8.2 percent on the same period last year and reflecting the strength in the labour market. VAT remains ahead of the same period last year, up by €1.4 billion, or 11.2 percent. While cumulative corporation tax receipts to end-August were €12.7 billion, up by €0.9 billion on an annual basis; August receipts were €1.8 billion which is €1 billion less than collected in August 2022. Although a decline was expected, and there may be timing issues at play, the magnitude of the decrease is larger than had been anticipated, highlighting the inherent volatility in corporation tax receipts. 

Commenting on the figures, the Minister for Finance, Michael McGrath TD said: 

“The tax data to end-August return remain broadly positive, with tax revenues €3.3 billion ahead of the same period last year. However, the €1 billion drop in corporation tax this month, compared with the August 2022 figures, serves as a timely reminder of the underlying vulnerabilities that still remain in our public finances. 

This is a risk that I have highlighted many times, and Government has taken a number of steps to mitigate our exposure to this volatile revenue stream. €6 billion in windfall corporation tax receipts has been transferred to the National Reserve Fund, and work is ongoing in relation to establishing a longer-term investment fund. Government has also committed €2¼ billion in windfall receipts to fund increased capital investment over the period 2024-2026, enabling us to use some of these temporary revenues to fund permanent improvements to our economy and society. 

As we approach Budget 2024, the fall in corporation tax reinforces the importance of striking the correct balance between continuing to invest in our public services and maintaining the long-term sustainability of our public finances.”