Exchequer figures for May show an overall deficit in the public finances of €6.143bn. This compares with a deficit of €63m in the same month last year.
An unexpected increase in the amount of corporation tax collected offset sharp declines across all other tax heads.
Spending was up ahead of where it was planned to be by 19% or €4.175bn. The rise in expenditure reflects increased spending in response to the Covid-19 pandemic, particularly in relation to the Department of Health and the Department of Employment Affairs and Social Protection.
Corporation tax came in €1.224bn ahead of last year. The Department of Finance puts this down to increased levels of profitability in some companies, and not one-off factors.
The Department also notes that the 35.4% decline in VAT, while high, was less than projected. The fall off in income tax was also less than forecast.
Income tax receipts have proven more resilient to the broader economic shock, falling by 7.8% year on year. June income tax receipts will be important in providing a clearer assessment.
Minister for Finance, Paschal Donohoe said, “Workers in many of the worst affected sectors have suffered greatly during this crisis, but in normal times, thanks to our highly progressive income tax system, employees in these brackets pay less tax as a percentage of their salary than is the norm in most European countries.”
The minister said the figures show that the expected steep decline in consumption taxes has been offset by a rise in corporation taxes and relatively resilient income taxes.
“In relation to corporation tax, as I have said many times before, receipts of this order will not last forever. Even if receipts prove resilient during the current crisis, they will decline in the near future. As such, excess returns should be used to reduce the extraordinary amount of borrowing the State is taking on to fight this crisis,” he said.
Chambers Ireland said the figures are a stark reminder of the impact COVID-19 has had not only on the health of our people, but on our economy.
“If these businesses are to recover in the months ahead, they will need every assistance to do so,” said Chambers Ireland CEO, Ian Talbot.
“It is also vital that we restore taxation levels as rapidly as possible to ensure that we can continue to meet the Government’s increasing Current Expenditure commitments to deal with the consequences of this crisis.”
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