Press release
July Exchequer returns demonstrate scale of fiscal challenge in line with expectations – Donohoe
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- Today’s Exchequer returns show that tax revenues in July were down by €983 million or 18.6 per cent on July last year, driven primarily by a decline in VAT receipts
- Overall tax revenue to end-July is down by 2.5 per cent or €791 million, boosted by strong corporation tax returns
- Reflecting significantly reduced consumption, VAT receipts to end-July are now down by over €2.2 billion or 22.7 per cent on last year
- Similarly, excise receipts have fallen by 17.6 per cent, or €604 million to end-July
- Total net voted expenditure to end-July was just over €38 billion, up by €8.7 billion, or just under 30 per cent on last year
- The rise in expenditure reflects increased departmental drawdown in response to the Covid-19 pandemic, particularly in the areas of Health and Social Protection
- An Exchequer deficit of over €7.4 billion was recorded to end-July 2020.
An Exchequer deficit of €7,405 million was recorded to end-July 2020. This compares with a surplus of €896 million in the same period last year. The €8,301 million year-on-year deterioration in the Exchequer balance is primarily driven by increases in voted current and capital expenditure. Cumulative tax receipts for the year are €31,153 million, down by €791 million, or 2.5 per cent, on the same period last year. Receipts to date have benefitted from a strong performance in January and February as well as solid corporate tax receipts, which have compensated to an extent for sharp declines in other tax heads, particularly on VAT and excise receipts.
Cumulative income tax receipts to end-July are now slightly down on a year-on-year basis, by 0.7 per cent. The highly progressive nature of the income tax system continues to provide some resilience to receipts, but this revenue stream nonetheless suffered a further year on year decline in July, falling by 8 per cent, or €138 million.
Reflecting the fall in personal consumption in recent months, VAT is down €2,216 million to end-July compared to the same period last year, while excise is down €604 million. Excise in the month saw some recovery, with receipts of €598 million up by €93 million or 18.4 per cent on last year. Indications are that this was driven by sales of alcohol and tobacco, with the latter boosted by the continuing decrease in international travel, which has impacted on cross-border shopping. Corporation tax receipts in the month were down by €271 million or 62.1 per cent on July last year. While July is not a major month for corporation tax, and receipts on a cumulative basis remain strongly ahead of 2019, this serves to underline the volatility inherent in this revenue stream.
Overall, the aggregate outturn to end-July continues the trend seen in previous months, reflecting a steep year on year decline in VAT and excise duties but offset to some extent by strong corporation taxes and, to a lesser extent, some resilience in income tax.
Total net voted expenditure to end-July was €38,072 million. In year-on-year terms, this was up €8,662 million, or 29.5 per cent on the same period in 2019. The rise in expenditure reflects increased departmental drawdown in response to the Covid-19 pandemic, particularly in relation to the Department of Health and the Department of Employment Affairs and Social Protection.
Commenting on the figures, the Minister for Finance, Paschal Donohoe T.D. said:
‘Today’s Exchequer returns confirm that the Covid 19 pandemic continues to have a major impact on the country’s finances. The extraordinary increase in public expenditure is a result of the Government’s commitment to supporting our health service and the wider economy through this unprecedented period, as demonstrated with the recent announcement of the July stimulus plan to support businesses and get people back to work. A deficit of this magnitude underlines the extent of the fiscal challenge we face in placing the public finances on a sustainable and credible trajectory as the economy recovers’.
ENDS
Notes to editors:
- The forecast for tax revenue was set out in SPU 2020 in April.
- Tax revenue last year amounted to €59.3 billion.
- The April Fiscal Monitor incorporated the revised taxation profiles for 2020.