There was mixed news for the Exchequer in the March tax figures, with a large drop in corporation tax receipts the main feature.
On the positive side, income tax receipts remain strong, up 7.6% year to date despite tax reductions for most employees from 1 January 2024.
VAT receipts for March were also solid, 6.2% ahead of March 2023 and while slightly behind target, reflect robust consumer spending in January and February. Despite widespread geopolitical risks, consumer confidence appears high, perhaps helped by anticipated decreases in interest rates later in the year.
However March saw a significant drop in corporation tax receipts, down 25% (€800m) year to date.
Of most concern will be what today’s figures mean for full year corporation tax returns. The March figures are likely to have been heavily impacted by tax payments made by one or two very large groups, based on lower profit forecasts for 2024. If this trend continues, we could see similar drops in corporation tax receipts for the remainder of the year.
However, our reliance on such a small cohort of large companies means there will continue to be significant volatility in corporation tax receipts, something we saw throughout the second half of 2023.
Overall, a very mixed day for the Exchequer.
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