Another large outperformance from corporation taxes kept Ireland’s public finances in relatively good shape in April, despite the costs of the pandemic.
According to the latest Exchequer returns, both government revenue grew by 1% year on year (yoy) in May despite the lockdown measures in place and the surge in unemployment. Corporation tax grew 91% yoy in May and by 92% year to date, putting this revenue stream €1.7bn ahead of last year through the first five months of the year.
Despite the unemployment rate surging from 4.8% to over 20% in recent months, income tax receipts fell by just 8% yoy in May, which is milder than expected. Elsewhere, revenue declines in VAT receipts (-35% yoy) and excise duties (-36% yoy) were to be expected given the drop in consumer spending.
Capital expenditure fell by 7% yoy while current expenditure grew 23% yoy in May, resulting in a 21% increase in total expenditure. There was a 67% yoy increase in spending by the Department of Employment Affairs and Social Protection and a 22% yoy increase by the Department of Health.
According to Goodbody Stockbrokers, "The overall budget deficit through May stood at €8.3bn (excluding non-government items). In terms of the full-year forecasts, we anticipate the budget deficit will swell to over €25bn, in excess of 10% of Gross National Income. That being said, the Exchequer returns for May are relatively strong given the market backdrop."
They added, "In our latest Health Check, we contested that many multinationals in Ireland primarily in the Health care IT sectors would be somewhat shielded in this crisis, and that appears to be the case so far."