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Exchequer returns

Exchequer returns November 2021 – Peter Vale commentary

Peter Vale Peter Vale

November is by some distance the most significant month for Exchequer receipts so today’s figures were of particular importance.

Total taxes collected for the month came to €11.3bn, €1.5bn ahead of target, which to our knowledge is the first time tax receipts for a single month have exceeded €11bn in the history of the state. The fact that this milestone was hit during a pandemic is remarkable.

The figures for November were impressive across the board, with all the major tax heads performing strongly.

Income tax receipts remain significantly ahead of both forecast and 2020, with higher earnings in key sectors driving stronger tax receipts. Returns for the year to date are 15.7% higher than 2019,  ie pre COVID, again demonstrating how resilient income tax receipts have been throughout the pandemic.

The higher earnings have led to buoyant consumer spending, reflected in VAT receipts that are running at almost 13% ahead of pre COVID levels, again quite a remarkable statistic. It’s clear that most consumers have fully adjusted to the new environment, with higher online spending likely to be behind much of the increase.

November is the biggest month for corporation tax and receipts for the month were €778m ahead of forecast. For the year to date, corporation tax receipts are now €2.8bn ahead of target, with the technology and life sciences sectors driving much of the growth.

With further global tax changes not likely to kick in until 2023 at the earliest, there’s no reason to believe that corporation tax receipts will drop in 2022. Looking further ahead, it’s possible that the higher 15% tax rate payable by larger groups will make up for any tax receipts diverted to market jurisdictions, thus stabilising future returns.

Overall, much uncertainty remains over the future trajectory of corporate tax receipts. However, if the corporate profits of the key multinationals based here continue to increase, it’s likely that corporate tax receipts will follow suit.

Capital Gains Tax receipts were also strong, with the Department noting that a combination of rising property values and more share transactions was behind the increase.

With one month to go, it looks likely that full year tax revenues will be at least €11bn ahead of 2020 receipts, which would represent a remarkable turnaround in the public finances.

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