Tax revenues fell in January following the imposition of Level 5 restrictions at the end of last year, according to the latest records from the chessboard. Total tax revenue for the month fell almost 9% (520 million euros) to 5.4 billion euros.
“January’s revenues are the first returns to reflect the Level 5 restrictions at the end of 2020 and, as a result, have seen year-over-year declines in virtually all tax counts,” said the Ministry of Finance.
VAT revenue was hit the hardest, reflecting the impact of consumption restrictions during the traditionally busy Christmas season. Sales tax revenue was € 2.3 billion for the month, down nearly 13% from the same month last year. January is normally the highest VAT month of the year as it includes the Christmas shopping period.
Corporate tax, excise duties and stamp duty have also been reduced.
The exception was income tax, the government’s largest tax channel, which again performed better than expected. It generated € 2.3 billion in January, up nearly 4% from the same month last year, continuing what the ministry has described as a “resilience trend”.
The ministry said it was suspending its normal monthly tax profiles, which are used to compare the performance of each tax heading, until it updates its economic forecast in April. Indeed, the tax revenue forecast for 2021 contained in the budget was no longer valid, he said, because it was based on a hard Brexit and did not take into account a vaccination program against the Covid- 19.
“Clearly, things have changed since October. Under the current circumstances, the October tax revenue forecast is of limited use, ”the ministry said.
The collection of VAT returns in January allowed the Treasury to register a surplus of 1.2 billion euros last month. But the department said that, over 12 rolling months, public finances were in deficit to the tune of 12.7 billion euros in January.
This is due to the combination of a fall in tax revenue and an increase in expenditure to support wages and businesses. Total spending for the month amounted to € 6.26 billion, 11.1% more than the same period in 2020.
“Today’s figures show the impact of public health restrictions on consumer spending,” said Finance Minister Paschal Donohoe.
“January is generally the most important month for VAT revenue, but, as expected, due to restrictions in November and late December, the figures for this month are down considerably from last year.” he said, while noting that tax revenues will suffer again in the coming months as the effects of the current restrictions are felt.
However, he said, there is light at the end of the tunnel with the number of cases dropping a vaccine being deployed.
“For businesses that depend on face-to-face interaction, such as the hospitality industry, the government will continue to provide a wide range of supports to individuals and businesses,” he said.
Public Expenditure and Reform Minister Michael McGrath said the impact of the pandemic continues to be felt on the spending side of government accounts.
“The main contributor to this increase is by far the area of social protection, which represents almost a billion euros more than for the same period last year,” he said. This is mainly due to the Pandemic Unemployment Payment (PUP) which cost 509 million euros in January alone and the wage-to-employment subsidy program which cost 365 million euros, a- he declared.
Almost 480,000 people receive the PUP in January with expenses of more than 140 million euros per week while 46,000 employers are registered for the wage subsidy.
“While today’s figures are 8.8% lower than January 2020, very high income tax figures offer some hope the economy can rebound strongly once widespread immunization is in place. “said Peter Vale, tax partner at Grant Thornton Ireland.
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