Corporation tax in September came in below the Department of Finance’s estimate for the second month in a row, according to the latest Exchequer figures published this afternoon.
The data came as the Department of Finance Chief Economist warned that it looks like tax revenue for 2023 will undershoot the most recent forecast.
The Exchequer recorded a surplus of €1.1 billion at the end of last month. This compares to a surplus of €7.9 billion at the same point last year. This also takes account of €4 billion transferred to the National Reserve Fund in February.
Tax receipts overall came in at €61.4 billion in the nine months to the end of September. This was €3.5 billion or 6.1% ahead of the same period last year. It was driven by growth in income tax, VAT and corporation tax.
Income tax was up €1.8 billion or 8.2% in the period to the end of September, compared to the same period last year. This was broadly in line with expectations, according to a statement from the Department.
VAT receipts to the end of September were €16.8 billion. That was €1.5 billion or 9.7% ahead of the same period last year but below expectations by €100 million.
Corporation tax came in at €1.8 billion in September. This was €300 million or 12.4% less than September last year.
In the nine months to the end of last month, cumulative corporation tax receipts were €14.4 billion.
This is €600 million higher than the same period last but is ‘significantly’ behind profile by €700 million.
According to the statement from the Department of Finance, this second monthly shortfall in corporation tax receipts compared to expectations underlines ‘the volatility in this tax head.’
The total amount of corporation tax collected in the months of July, August and September was €3.9 billion.
This is €1.16 billion, or 23%, less than the amount collected in the same period in 2022.
Overall tax revenue in the third quarter came in at €20.5 billion. This was just over €500m, or 2.5%, less than in the third quarter of 2022.
On a 12-month rolling basis, the Exchequer recorded a deficit of €1.8 billion last month.
Excluding once-offs such as the contribution to the National Reserve Fund and estimated ‘excess’ or ‘windfall’ corporation tax, the Department estimates an underlying deficit of ‘circa €8.5 billion’ on a 12-month rolling basis.
Speaking at a press conference this afternoon, Minister for Finance Michael McGrath said the tax data to the end of September demonstrates the need for caution as the Government finalises Budget2024.
He said the sharp underperformance of corporation tax is more evidence that receipts cannot be relied on.
Mr McGrath said it now appears likely that corporation tax receipts will not meet the 2023 target and that there will be a levelling off of growth in corporation tax after the recent extraordinary rises.
Department of Finance Chief Economist, John McCarthy, added that it looks at this stage like tax revenue for 2023 will undershoot the most recent forecast.
Michael McGrath said he believes the fall in corporation tax relates to the external environment and lower multinational profits.
He said any level of growth in corporation tax take to 2026 is going to be moderate compared to past performance.
He added that he anticipates that the economy will continue to grow in the coming years.
Commenting on today’s figures, Peter Vale, Tax Partner at Grant Thornton Ireland said September saw another mixed bag of results for the Exchequer.
“Of most concern will be corporate tax receipts, 12% down on September last year. This follows a weak set of figures in August and underlines the volatility of corporation tax receipts,” he said.
Mr Vale said if this performance is repeated in the key month of November, the expected large Budget surplus for 2023 will be under threat.