Bumper corporate taxes shelter Irish finances from worst of COVID-19

Tax returns were far ahead of forecast for the second month in a row after the state took in 2.4 billion euros in corporate tax in June, almost 1 billion euros more than expected.

Ireland's tax take for the first half of 2020 was unexpectedly 0.7% higher year-on-year after yet another surge in corporate tax returns and more resilient income tax receipts continued to stave off a forecast coronavirus-induced collapse. Tax returns were far ahead of forecast for the second month in a row after the state took in 2.4 billion euros in corporate tax in June, almost 1 billion euros more than expected. The 1.4 billion euros of income tax returns was far above the 1 billion the finance ministry had thought the monthly take would fall to.

Income tax for the month of June was still down 21% year-on-year, reflecting the 22.5% of the labour force temporarily or permanently unemployed as a result of a shut down of the economy that was only mostly unwound this week. However Ireland had expected its tax take for the first half of the year to be 15% or 4 billion euros lower year-on-year when it published revised figures taking account of the lockdown that began in March.

"While there is an unprecedented level of uncertainty, there is some suggestion in the figures to date that corporation tax may prove to be relatively well insulated from the impact of the pandemic," the finance ministry said in a statement. "Similarly, while income tax is experiencing a steep decline in annual terms, the drop has not been as severe as anticipated. This is an encouraging sign for future revenues as economic and social restrictions continue to be gradually loosened."

With government spending 20% or 5.4 billion euros ahead of its original target, the state posted a 5.3 billion euro budget deficit at the end of June. The finance ministry in April forecast a deficit of between 7.4% and 10% of GDP for 2020.