In the first set of Exchequer figures post budget, there was more good news for the government, with exceptional figures returned for October.
Income tax figures remain very strong and significantly ahead of the periods immediately pre COVID, further evidencing the strong earnings in many sectors. October itself was a particularly strong month, with the tax take 17.4% ahead of forecast and over 40% ahead of October 2020.
Importantly, the robust income tax returns look sustainable, with a significant surplus over forecast now expected for the full year.
October is a 'non VAT' month but VAT returns for the year to date are impressive, landing at about 8% ahead of pre-COVID levels. Again, the VAT figures look sustainable as they are fuelled by stronger earnings and resultant spending. Any fears that the figures reflected a temporary post-COVID spending splurge have been allayed.
There has been a significant focus on corporation tax receipts in recent weeks. The figures this year to date have been very strong, driven by positive results across key sectors such as technology in particular. The corporation tax receipts for October itself are exceptional, almost €1bn ahead for the month alone. The Department has pointed to strong returns from the life sciences sector as well as tax settlements of €300m driving the October figures. While November will be the critical month, it looks like there will be a large corporation tax surplus over forecast by year end.
Going forward, the position remains uncertain. On its own, an increase in the corporate tax rate to 15% will see tax revenues rise. Against that the diversion of a portion of taxable profits to market jurisdictions will see our tax take diminish. Will we see a decrease in foreign investment in Ireland as a result of the changing global tax landscape? With so much uncertainty, including the risk that the minimum tax rate plans fail to make it through Congress in the US, putting a figure on the future impact on corporate tax revenues is practically impossible.
Overall, the particularly strong October figures point to full year tax revenues of close to €10bn ahead of 2020 receipts, which would be a remarkable outcome.
