Drop of 25% in corporate tax revenue due to technical factor, minister claims

A drop of 25% in Ireland’s corporate tax income in the first three months of 2024 has been blamed on a “technical factor” and is expected to be “made up” later in the year, a cabinet minister has said.

Finance Minister Michael McGrath said corporation tax receipts of 2.4 billion euro were down by 0.8 billion euro year on year, but expected them to recouped as the year went on.

Mr McGrath said the drop illustrated the “exceptional volatility” of this tax revenue stream.

Department of Finance chief economist John McCarthy said officials could not give a month by which they expect the funds to be recouped.

“We’re not allowed to have access to revenue-specific data but Revenue have informed us that the shortfall will be made up over the course of the year without specifying the particular time,” he said.

Ireland collected a record total of 23.8 billion euro in corporate tax in 2023.

In its Budget 2024 estimates, 3.5 billion euro in corporation tax was expected in quarter one, with a total of 24.5 billion euro expected by the end of the year.

Mr McGrath said they are still sticking to their Budget Day forecast for what corporate tax is expected in the year ahead.

“As has so often been the case, the standout feature of the quarter one tax performance was on the corporation tax front. Receipts of 2.4 billion euro are down by almost a quarter on the same period last year,” he said.

“It appears that this is likely due to a technical factor relating to the timing of large payments and we believe is likely to be made up later in the year.

“In other words, the March decline does not suggest that, at least at this early stage, the corporate tax performance would differ significantly from what we set out on Budget Day last October.

“Nonetheless, it does underscore again the exceptional volatility from month to month in this tax head, where a small number of large companies can have a pronounced impact on overall receipts.”

Minister for Public Expenditure Paschal Donohoe said that although overall expenditure in March has “improved” compared to a month earlier, on a year-by-year basis it is increasing by 14.9%.

He said: “We have a considerably improved position at the end of March versus where we were at the end of February.

“However, that being said, expenditure is increasing by 14.9% on a year-by-year basis and we’ll need to continue work during the year to bring in spending in line with the commitments that were made on budget day.

“If you look at where we are with current expenditure at the moment, it’s 1.3% ahead of profile and that spend that it is ahead of profile, to some degree, is offset by where we are with capital expenditure being slightly below profile, but that in turn is simply due to timings with regards to the increased cost of business scheme.”