The British Government’s financial standing has been fortified ahead of the budget, primarily driven by a significant increase in business tax revenue. The spike in corporation tax income in August was more than double the figures from the same period last year. Official data reveals a total of €3.7 billion was gathered this year, showing a growth of roughly 109 per cent, adding an extra €1.9 billion, contrasted with August 2023.
The Finance Department attributes this significant rise to a timing factor, compensating for an earlier decline. Corporation tax receipts for the year to date still exhibit a considerable increase of 28.4 per cent compared to the same span in 2023, bringing an additional €3.6 billion to the State’s funds.
In total, August saw tax receipts reach €7.4 billion, bringing the total amount gathered in the first eight months of 2024 to €59.8 billion, a growth of €6.7 billion or 12.6 per cent compared to last year.
The consistent high corporation tax revenue, primarily generated from a handful of American multinationals, has led the Government to reiterate that this monetary influx might be short-lived and should not be relied upon indefinitely.
The Irish Fiscal Advisory Council issued a warning on social media, indicating increasing expenditure overruns. It outlined that high tax income does not automatically equate to increased budget capacity for 2025. Rapidly increasing net expenditure next year could result in heightened living costs and instability in public finances in the event of a future recession.
For the first eight months of 2024, total gross current voted expenditure reached €56.7 billion, a 9.6 per cent surge when compared to the same period the previous year. This expenditure is also 3.9 per cent over the projected budget, accounting for an additional spending of €2.2 billion.
Although the inherent variability makes it challenging, Minister for Finance Jack Chambers is likely to use these numbers to reveal substantial spending and tax initiatives in his inaugural budget announcement on October 1st. This plan, Budget 2025, will be the last one before the anticipated general election, which may occur as early as November this year or as late as March next year.
The promising patterns observed in income tax and value-added tax (VAT) suggest a thriving economy. The previous month saw the remarkable continuation of the robust performance of income tax, amounting to €2.6 billion. This pushed the annual accumulation to a hefty €22.2 billion, exhibiting an increase of €1.4 billion or 6.9 percent compared to the same time span in 2023.
Even though VAT isn’t due in August, the period from January to August has recorded a VAT income of €14.5 billion. This represents an increase of €1 billion or 7.5 percent compared to the previous year’s figures.
The Department has reported a surplus of €3.8 billion in the exchequer, a stark contrast to the €0.3 billion deficit seen in the same period the preceding year. This shows a remarkable improvement of €4.1 billion. However, it was pointed out that the annual comparison has been skewed due to a transfer of €4 billion to the National Reserve Fund in the previous year. Looking at the numbers on a 12-month rolling basis, the exchequer has reported a surplus of €5.3 billion.
Peter Vale, a tax partner at Grant Thornton Ireland, praised the extraordinary performance and highlighted the doubling of the corporate tax as a key feature of another advantageous month for the exchequer. He added that due to the consistently strong performance, it’s increasingly challenging to pinpoint the unexpected elements fueling this surprising upward trend. Despite our dependence on a handful of companies, he anticipates 2024 to significantly contribute to the corporation tax receipts.
Tom Woods, KPMG’s head of tax, suggested that these figures would likely shape the government’s final decisions on spending and tax as the current budget is finalised. While he welcomed the planned personal tax adjustments in the 2025 Budget that will positively impact workers, he also emphasised the need for the government to implement effective strategies to address business costs and introduce tax measures to stimulate the provision of affordable housing.