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Exchequer returns August 2023 – Peter Vale commentary

Exchequer tax receipts for August were surprisingly poor, reversing a sustained period of positive results.

The biggest drop was in corporation tax, with figures for the month 36% (€1 billion) behind August last year. Given the strength of the corporation tax receipts in the critical month of June, this was a surprise and underlines the volatility in corporation tax receipts.

The weak corporation tax figures also reflect our dependence on a very small number of companies for a significant portion of corporation tax revenues. Poor results for one large company can have a significant adverse impact on overall corporation tax revenues.

After today’s figures, the risk of weaker corporation tax receipts in the key month of November increases. Poor November figures could erode much of this year’s planned Budget surplus. 

August also saw the rate of increase in income tax receipts continue to level off, although year to date receipts are still circa 8% ahead of last year. The figures suggest that a greater number of people in employment is now driving year-on-year growth as opposed to wage inflation. 

August is a quiet month on the VAT front but there is evidence of a levelling off in these figures too. This isn’t surprising given the combined effect of ongoing higher energy costs and the impact on borrowers of higher interest rates. Less disposable income translates into less discretionary spending and lower VAT receipts.

Overall, this was not a good month for the Exchequer, with the dip in corporation tax receipts of particular concern.

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