DUBLIN (Reuters) – Ireland took in more tax in the first six months of 2020 than the same period last year despite the COVID-19 shutdown as it raised a billion euros more than expected in corporate tax in June, much of it from multinationals based in the country.
Income tax, meanwhile, was more resilient than expected, with the government taking in 1.4 billion euros in June compared to the 1 billion it had forecast, as the higher earners who pay the majority of tax continued to work.
“Exchequer returns for June hint that the damage both to the Irish economy and the public finances at least in terms of the initial impacts of the coronavirus could be less than widely feared,” said Austin Hughes, Chief Economist at KBC Bank Ireland.
If enough additional funds are provided to stimulate the economy in the coming weeks, the Irish economy may be able to avoid the sort of double-digit declines in employment and consumer spending many were predicting, Hughes said.
Finance Minister Paschal Donohoe said he planned to stick to the government’s budget deficit forecast of between 7.4% and 10% of gross domestic product despite the windfall, indicating the money may be used for additional expenditure or stimulus.
He did not say how much the government would devote to a fiscal stimulus due to be announced later in July and warned that government expenditure in the coming months would be very difficult to predict.
The state took in 2.4 billion euros in corporate tax in June, almost 1 billion euros more than expected to leave the tax take for the first half of 2020 0.7% higher year-on-year compared to a government forecast that it would fall 15%.
Despite beating forecasts, 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.
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.
(Reporting by Padraic Halpin and Conor Humphries; Editing by Angus MacSwan and David Evans)
