The fiscal deficit narrowed to 4.9 billion euros in November, according to the latest Treasury figures published this afternoon.
Tax receipts for the period ending last month were ahead of government targets by 5.4 billion euros, or 9.4%, buoyed by higher income taxes, value-added tax and corporate tax.
Government spending is 2.6 billion euros, or 3.4%, behind the target.
A stronger-than-expected recovery in large parts of the economy led to higher taxes.
Consumer spending boosted VAT revenue just above €1 billion ahead of the target and increased by just over 24% – or nearly €3 billion – for the eleven months of the year through the end of November, compared to the same period in 2020.
The corporate tax gave another unexpected boost. It is now running at 26% – or roughly €2.8 billion – more than what the government expected it will raise by the end of last month.
This includes 464 million euros deducted from tax through payments to companies under the Covid support schemes.
In a statement issued this afternoon, the Ministry of Finance downgraded the large increase in corporate tax to « …strong and profitable export sales in the life sciences, pharmaceuticals, and information and communications technology sectors. »
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Income tax is also just over €1 billion, although it is distorted compared to last year when the tax due date for the self-employed was pushed back to December.
Meanwhile, the government appears intent on spending less than it had planned this year. Voting expenditures as of the end of November were approximately €2.7 billion, or 3.4%, below target.
November is the biggest month of the year for tax collection, and the most important month for income and corporate taxes.
« The tax receipts through the end of November provide another positive indication of the strength of our economic recovery in recent months, » said Finance Minister Paschal Donohue.
“VAT receipts, in particular, reflect the significant recovery in consumer spending, while income tax performance reflects the continued recovery in the labor market. Corporate tax revenue in November was very strong, reflecting the very strong performance of many high-tech sectors during the pandemic. « .
By the end of November, voting spending totaled nearly €75 billion – about €1.25 billion ahead of spending levels in the same period last year.
€68.5 billion of that amount has been accounted for by current spending, with four out of five of this – just under €56 billion – related to spending in the frontline departments of education, social protection and health and the Ministry of Further Education and Higher Education.
“This spending reflects the government’s continued focus on protecting the most vulnerable in society and prioritizing essential social services against the effects of Covid-19,” said Public Expenditure and Reform Minister Michael McGrath.
« The 2022 budget has been prepared in line with the medium-term fiscal strategy outlined in the July Summer Economic Statement. This sets a clear framework until 2025 to deliver sustainable improvement in public services and much-needed infrastructure investments, » he added.
Current spending is €796 million – or 1.1% – behind the profile, while capital spending is over €1.9 billion – or 23.3% – behind the profile.
Peter Vail, tax partner at Grant Thornton, said the 11.3 billion euro tax collection marks the first time that tax revenue for one month has exceeded 11 billion euro.
« The fact that this feat occurred during a pandemic is remarkable, » he said.
He described the numbers as « impressive » across the board with all major tax chiefs performing strongly.
Regarding corporate tax performance, Valley said that while global tax changes are not likely to begin until 2023 at the earliest, there is no reason to believe that corporate tax revenue will decline next year.
« Looking forward, it is likely that the higher tax rate of 15% paid by larger groups will offset any tax revenue transferred to market authorities, thus stabilizing future returns, » he said.
« Overall, there is still a lot of uncertainty about the future path of corporate tax revenue. However, if corporate profits for the major multinational corporations located here continue to increase, it is likely that corporate tax revenue will follow suit, » he added.
12 months of renewed disability
The Treasury now uses a twelve-month rolling figure for the Treasury deficit.
This is the 4.9 billion euro shortfall that was reported this afternoon. The actual fiscal deficit was 1.5 billion euros at the end of November.
This compares with a deficit of 8.9 billion euros recorded in the same period in 2020.
This means the deficit so far for 2021 has improved by 7.5 billion euros, mostly driven by significant increases in tax revenue.
Despite significant increases in the national debt over the past two years, the cost of repaying that debt continues to fall.
In the year to the end of November, debt servicing costs were €3.7 billion. This was 879 million euros less than the same period last year, a decrease of 19.4%.
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