Tax revenues fell sharply in March as a result of the restrictions to stall the outbreak of COVID-19. Having fall by 16% year on year (yoy) in March, total revenues fell 6% yoy in April. Within this, excise duties were roughly half of the same month in 2019, while income tax fell by 6% yoy.
Goodbody Stockbrokers say this comes as no surprise given the trajectory of unemployment in a matter of weeks with nearly 600,000 people registering for the Pandemic Unemployment Payment since the latter half of March. Goodbody say this explains the massive increase in spending in the Department of Employment and Social Affairs (+31% in the year to date) .
Looking at other revenue streams on a year-to-date basis to account for low bases and the timings of payments, Goodbody say it is evident that the crisis has had widespread affects in almost all areas with declines in VAT receipts (-15%), excise duties (-18%) and CAT (-10%).
Meanwhile, expenditure is showing similar patterns to those seen during the Global financial crisis, with current spending swelling (+51% yoy in March) while capital spend is curtailed (-10% yoy) resulting in an overall spending increase of 41% yoy in April and 18% ytd. The budget deficit through April stands at €8.5bn (excluding non-government items) compared to €4.4bn this time last year.
According to Goodbody Stockbrokers, "In 2009, the budget deficit swelled to 14% of Gross National Income. A similar outturn is now conceivable in 2020, but this time out the emergency spending is a necessary part of the toolkit."