February is a relatively quiet month on the tax receipts front, with a key focus being any impact that the ongoing coronavirus scare may have on returns.
Overall it was a solid month on the tax receipts front, with the figures for the year to date now running at 13.8% ahead of the same period last year.
After a very strong January, income tax receipts weakened in February, which the Department blamed on the timing of payments by large employers. While it is clearly still early days, income tax receipts are currently running at 14.6% ahead of the same period last year, which could produce a significant income tax surplus by year end.
February is typically a quiet month for corporation tax receipts, although figures for the month were again well ahead of target, albeit making up a very small portion of the yearly tax take from companies. A big concern will be the impact of the coronavirus on the 2020 results of many companies. Given the scale of the outbreak, it is possible that there will be a significant dip in companies’ profits, leading to a drop in corporate tax revenues in the coming months. We may see the first indications of this next month but it will be May before the impact will really be seen in the tax figures.
A dip in corporate tax receipts as a result of depressed economic activity could coincide with a dip in income tax receipts if employment levels fall. This would likely have a knock on impact on spending and VAT receipts. Hence the state of the public finances in the coming months could be heavily influenced by the success or otherwise of efforts to contain the spread of the coronavirus.
So in summary, while February was another broadly positive month on the tax receipts front, figures for future months will likely be significantly influenced by the impact of the coronavirus globally.