FINANCE MINISTER MICHAEL McGrath has welcomed “broadly positive” tax data to the end of August but said a €1 billion drop in corporation tax shows “underlying vulnerabilities” still remain in public finances.

The Department of Finance today released its Fiscal Monitor for August 2023.

The Exchequer figures show that tax revenues in the eight months to the end of August were up by €3.3 billion on the same period last year, to €53.1 billion.

A Department spokesperson said this was driven by strong income tax, VAT, and corporation tax receipts.

Income tax receipts of €2.5 billion were recorded last month, up €0.1 billion on the figures last year.

On a cumulative basis, income tax receipts of €20.7 billion were recorded, €1.6 billion ahead of the same period last year.

And while August is a non-VAT due month where receipts of €0.3 billion were recorded, VAT receipts in the year to August reached €13.5 billion.

This is €1.4 billion higher than the same period last year.

Meanwhile, the total gross voted expenditure in the first eight months of this year to end-August amounted to €56.4 billion, which is €4.9 billion ahead of the same period last year.

Gross voted expenditure is spending on public services.

A Department spokesperson said this gross voted expenditure figure “reflects continued increases in capital investment as part of the National Development Plan and support for our public services and our growing population”.

Elsewhere, an Exchequer deficit of €0.3billion was recorded to end-August.

This compares with a surplus of €6.3billion in the same period last year,

The Department said the difference is “primarily driven by the transfer of €4 billion to the National Reserve Fund in February of this year, as well as a decline in corporation tax this month.

Corporation tax

While Corporation tax to end-August was €12.7 billion, up by €0.9 billion when compared to the same period last year, it was down by €1 billion on a monthly basis.

Corporation tax receipts in August of this year amounted to €1.8 billion.

This figure was €2.8 billion last August, which represents a 36% drop.

A Department spokesperson said that “a sharp drop was anticipated”.

However, they added: “The magnitude of the decline is somewhat larger than had been expected, highlighting the inherent volatility in this tax head.”

Finance Minister Michael McGrath described the overall tax data as “broadly positive”.

However, he added that the drop in corporation tax this month, compared with the August 2022 figures, “serves as a timely reminder of the underlying vulnerabilities that still remain in our public finances”.

“This is a risk that I have highlighted many times, and Government has taken a number of steps to mitigate our exposure to this volatile revenue stream,” said McGrath,

“As we approach Budget 2024, the fall in corporation tax reinforces the importance of striking the correct balance between continuing to invest in our public services and maintaining the long-term sustainability of our public finances.”

Elsewhere, Minister for Public Expenditure Paschal Donohoe said the gross voted expenditure figures highlights the government’s “commitment to providing better public services to support improvements in the quality of life in Ireland both now and in the future”.

‘Surprisingly poor’

However, Peter Vale, a Tax Partner at Grant Thornton Ireland, described the exchequer tax receipts for August as “surprisingly poor”.

“Given the strength of the corporation tax receipts in the critical month of June, this was a surprise and underlines the volatility in corporation tax receipts,” said Vale.

He added that the “weak corporation tax figures reflect our dependence on a very small number of companies for a significant portion of corporation tax revenues”.

“Poor results for one large company can have a significant adverse impact on overall corporation tax revenues,” said Vale.

Vale also warned that today’s figures increase the risk of “poor November figures” which could “erode much of this year’s planned Budget surplus”.