• Today’s Exchequer figures show that tax revenues in Q3 were down 10 per cent, or €1.4 billion on the same period last year and were down 3 per cent or €1.2 billion year on year;
• Reflecting reduced personal consumer spending, VAT receipts in Q3 are down nearly 19 per cent, or over €900 million;
• Income taxes were down 7.1 per cent, or €373 million, in Q3 but overall year-to-date receipts continue to exceed expectations;
• Although down sharply on a year-to-date basis (13 per cent), excise duties have recovered well in the quarter, up nearly 9 per cent on Q3 last year, with travel restrictions across the summer months likely contributing to the increase;
• Similarly, corporation tax receipts continue to exceed expectations up €90 million in the quarter and €1.6 billion year to date;
• Total net voted expenditure to end-September was €48.1 billion, 25 per cent or €9.6 billion higher than the same period in 2019;
• The rise in expenditure reflects increased departmental drawdown in response to the Covid-19 pandemic, particularly in the areas of health and social protection;
• An Exchequer deficit of €9.4 billion was recorded to end-September 2020.
An Exchequer deficit of €9,373 million was recorded to end-September 2020. This compares with a surplus of €38 million in the same period last year. The €9,411 million year-on-year deterioration in the Exchequer balance is primarily driven by increases in voted current and capital expenditure. Cumulative tax receipts for the year are €39,568 billion, down by €1,213 million, or 3 per cent, on the same period last year. Receipts-to-date have benefitted from a strong performance in January and February as well as solid corporate tax receipts, which have compensated — to an extent — for sharp declines in other tax heads, notably VAT and excise receipts.
Cumulative income tax receipts to end-September are down, on a year-on-year basis, by 2.1 per cent, or €323 million. A combination of the sectoral nature of recent job losses and the highly progressive nature of the income tax system continues to provide some resilience to receipts, but this revenue stream nonetheless suffered a further year-on-year decline in Q3, falling by 7.1 per cent, or €373 million.
Similarly, although the third quarter is not significant in terms of corporation tax, receipts continue to over-perform and are now €1,631 million higher than to end-September last year. Conversely, reflecting the fall in personal consumer spending, VAT is down €2,444 million to end-September compared to the same period last year, while excise receipts are down €571 million year-to-date, even allowing for some recovery in Q3.
Overall, the aggregate outturn to end-September continues the trend of recent months, reflecting a steep year-on-year decline in VAT, but offset to some extent by strong corporation taxes and, to a lesser extent, some resilience in income tax receipts.
Total net voted expenditure to end-September was €48,126 million. In year-on-year terms, this was up €9,595 million, or 24.9 per cent on the same period in 2019. The rise in expenditure reflects increased departmental drawdown in response to the Covid-19 pandemic, particularly in relation to the Department of Health and the Department of Employment Affairs and Social Protection.
Commenting on the figures, the Minister for Finance, Paschal Donohoe T.D. said:
Today’s Exchequer figures provide a timely snapshot of the public finances as we prepare for Budget 2021. They show that although receipts are better than previously expected, much of the over-performance relates to corporation taxes — a revenue stream we cannot rely on over the medium-term’.
Today’s figures also show that the Government has directed an unprecedented amount of resources at fighting the pandemic. We have invested in our health service, protected incomes and supported business throughout this crisis. Budget 2021 will continue to use appropriate policies to direct resources at those who need it most.
The Minister for Public Expenditure and Reform, Michael McGrath T.D. said:
The expenditure increase of €10½ billion compared to last year, highlights the significant measures implemented to address the challenges from Covid-19. Social Protection spend is now projected to be more than €30 billion this year. This response from Government reflects the scale of the impact that the pandemic has had on people’s jobs and income. As we look towards Budget 2021, our priorities are to ensure that our key public services continue to deliver the services needed by our citizens while also putting in place the resources to support workers and businesses to recover.