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Exchequer returns November 2020 – Peter Vale commentary

Peter Vale Peter Vale

As November is the most important month for tax collections, there was a keen focus on the latest Exchequer figures.

Given the deferral of the income tax filing deadline to 10 December, it’s hard to read much into the November income tax numbers, which were not surprisingly well down on the same month last year. However, commentary from the Department points to the “continuing resilience” in the income tax figures, in particular ongoing PAYE payments.

Year to date income tax has proven to be very resilient and it wouldn’t be a surprise to see the deficit in November clawed back this month, once taxpayers file their returns.

November is also a key VAT month. VAT figures have begun to stabilise in recent months and today’s numbers continue that trend, with a 9% drop on November 2019 figures compared with a 50% drop in VAT receipts at the outset of COVID.

It is clear that significant government subsidies pumped into the economy are helping support consumer spending. With most retail outlets now open again following restrictions throughout November, there will be optimism that pent up demand will see large spend over the Christmas period, translating into strong VAT receipts in January.

It's worth noting that income tax and VAT receipts have been impacted by taxpayers electing to defer tax payments. Thus a significant portion of the above deficits will flow to the Exchequer next year.

November is the biggest month for corporation tax receipts. There was concern that a repeat of very poor October returns would completely erode surpluses built up year to date.

While corporation tax receipts in November were down circa €250m on an adjusted basis on last year, the figures were a lot better than many had feared. It suggests that many of Ireland’s largest taxpayers have enjoyed strong profits throughout COVID. This removes the spectre of large refund claims in 2021 and tax losses carried forward decimating returns in 2021 and beyond.

While the era of large corporation tax surpluses may be coming to an end, the news could have been a lot worse.

In summary, the latest Exchequer figures provide further evidence of a resilient economy in the face of COVID, with the improvement in corporation tax receipts particularly welcome.