During the secondary shutdown across Europe last December, the imposition of Level 5 restrictions has led to the fall of vax receipts seen this past January. Total tax revenue for the month of January 2021 was down nearly 9% compared to previous months, coming up to be around €520 million €5.4 billion.
Of the tax receipts, the VAT receipts have been hit the hardest. This largely is due to the impact of the decrease in consumed goods over the traditionally hectic Christmas period. In addition, there has been a continuous drop in excise duty, stamp duty, and corporation tax. The one exemption to all this would be the Stat’s income tax, which is their largest tax channel. This channel has performed better thane expected, which has become a common occurrence. The income taxes generated over €2.3 billion in January alone, which is up around 4% compared to the same month in 2020.
In forecasting how the economy will move in the future, the department states the suspension of its normal monthly tax profiles will soon be implemented. This is largely in part of the 2021 tax revenue forecast that was contained in the budget is no longer viable. The tax revenue forecast was predicted in October 2020, and from then the world economy, as well as the Irish economy, has obviously not followed the predicted outcomes.
This change overall was driven mainly by the change in consumption, the declining tax receipts, and the increas4ed spending on salaries by business supports. The total spending on the month was nearly over 6 billion euro, which is 11% higher than at the same time from in 2020.
Even though the vax receipts are dropping, there is still hope for companies due to the COVID vaccine being rolled out. For companies that rely on face-to-face interaction to complete the business, the Government has stated that they will still continue to provide a wide range of supports for both individuals and business themselves. It’s stated that the largest contributor to this increase in the area of social protection is mainly in due to the Pandemic Unemployment Payment (PUP), which cost the state over 500 million euro in January 2021 alone. With all the financial stress that global economies, as well as the Irish economy, is now facing, there is much uncertainty in how the markets and work will progress as the COVID vaccines slowly become accessible to the general public.
Lucas Zhang was a Finance major at Ohio State University. He writes about finance, mortgages, and technology for Irish Mortgage Brokers.