The Exchequer figures released today will make for mostly pleasant reading.
With the ongoing lockdown, there was a fear that VAT receipts could be hit hard. However consumers appear to have adjusted to the new norm, with receipts now settling at about 10% down on the pre COVID comparative. The figures for March 2021 versus March 2020 are relatively meaningless given the extensive relieving measures introduced this time last year.
Unquestionably ongoing government supports continue to prop up VAT receipts. Savings rates remain high, with the possibility of a large uplift in spending once restrictions ease. If this materialises, VAT returns will increase significantly, with the receipt of deferred VAT payments adding to the surplus.
Resilience has been used to describe how income tax receipts have held up throughout COVID. March 2021 continued this trend, with receipts actually 10% ahead of March 2020, which is another remarkable performance.
While corporation tax returns for the year to date have been modest, it will be difficult to ascertain any pattern in the figures until May at the earliest. However some of the largest taxpayers in Ireland are in the pharma and technology sectors, both relatively unscathed from the general COVID related economic downturn. This provides some optimism that corporation tax figures will hold up in the short to medium term.
Longer term, Ireland’s corporation tax receipts are under threat on a number of different fronts. At this stage global tax changes look inevitable; these will impact adversely on Ireland’s attractiveness. However the scale of these changes is uncertain, with some scaling back of the proposals likely.
Ultimately Ireland will likely remain the most compelling location in which to do business from a tax perspective, just not as attractive as we are today. It will increase the need to remain competitive on non tax factors.
In summary, given the scale of the COVID pandemic, the fact that tax receipts have held up so well is remarkable, although unquestionably government supports are propping up VAT receipts in particular.