gov - Extension to ‘pay and file’ deadline leads to large November tax shortfall, while Government supports continue to increase

Today’s Exchequer figures show that tax revenues in November were down €1.4 billion, or 14 per cent, on the same month last year;
November is the single largest month for tax receipts, but the ‘pay and file’ deadline extension, level 5 restrictions and the return of funds set aside for the Covid Restrictions Support Scheme (CRSS) distort this month’s returns;
Income tax receipts were down €1 billion, or 29 per cent on November 2019, primarily as a result of the ‘pay and file’ extension;
November is the largest month for corporation tax receipts, with over €3 billion received this month, broadly similar to November last year;
November is a VAT-due month and receipts were down €215 million, or 9.4 per cent on the same month last year;
Total net voted expenditure to end-November was €59.3 billion. This represents a 24 per cent, or €11.4 billion increase on 2019;
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 €8.9 billion was recorded to end-November 2020, an improvement on last month due to November being the largest month for receipts and a €900 million transfer of funds from the Social Insurance Fund to the Exchequer in respect of Pandemic Unemployment Payment. This transfer has no impact on the general government deficit.

An Exchequer deficit of €8,919 million was recorded to end-November 2020. This compares to a surplus of €3,355 million in the same period last year. The €12,275 million year-on-year deterioration in the Exchequer balance is primarily driven by increases in voted expenditure. Cumulative tax receipts of €51,130 million at the end of the period were down by 6.9 per cent or €3,761 million on last year. Receipts-to-date have benefitted from a strong performance in January and February as well as solid income and corporate tax receipts, which have compensated — to an extent — for sharp declines in other tax heads, notably VAT and excise receipts.

November tax receipts were impacted by three key issues. Firstly, in September the Revenue Commissioners extended the pay and file deadline for self-employed taxpayers to the 10th December. In previous years the deadline was the 30th November, meaning much of the traditional November receipts will now be paid in December. Secondly, Revenue have returned €430m to the Exchequer in funds set aside to pay the Covid Restrictions Support Scheme (CRSS). Finally, as level 5 restrictions came into effect on 21st October, there has likely been an impact on receipts, most notably in VAT returns — although given the two month lag in VAT the full effect will not be seen until January’s receipts.

Total net voted expenditure to end-November was €59,312 million. In year-on-year terms, this was up €11,359 million, or 23.7 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:

“The scale of Government intervention to support businesses mean that today’s Exchequer returns do not provide the clarity that previous November receipts have. However, the broad themes of the year to-date are apparent. PAYE receipts are holding up remarkably well; similarly corporation tax — although with a high degree of unpredictability and uncertainty. Taxes based on personal consumption, particularly VAT, have suffered greatly from the necessary public health restrictions. As set out in Budget 2021, the Government will continue to use the taxation system, where appropriate, to support individuals and business throughout this crisis”.

The Minister for Public Expenditure and Reform, Michael McGrath T.D. said:

“Overall gross voted expenditure of €73.5 billion is up by €13.8 billion versus the same period last year. This indicates the unprecedented level of support that Government continues to provide to businesses, to workers and to our key public services. This has enabled our health service to respond effectively to the challenges of Covid-19. It has ensured that our schools remain open and that students in further and higher education can continue to avail of training and education opportunities. “

Fiscal Monitor November 2020

ENDS

Notes to editors:

The revised forecast for tax revenue was set out in Budget 2021.
Tax revenue last year amounted to €59.3 billion.
The April Fiscal Monitor incorporated the revised taxation profiles for 2020.

Extension to ‘pay and file’ deadline leads to large November tax shortfall, while Government supports continue to increase – Donohoe & McGrath