Pandemic spending drives increase in deficit to €4.17bn in March
The public finances recorded a deficit of €4.172 billion in March, according to figures published this afternoon by the Department of Finance.
This compares to a deficit of €2.535 billion recorded in March 2020.
The increase in the deficit is driven by higher current spending in response to the pandemic.
The Department of Finance said on a 12-month rolling basis, the Exchequer has recorded a deficit of €13.953 billion.
Tax receipts in March are up 26% to €4.666 billion. However, the Department points out that this is in large part due to forbearance measures introduced in March 2020 which “flatter the year-on-year comparison.”
On a cumulative basis, tax receipts for the first three months of the year are €13.067 billion, marginally ahead by €134 million or 1% on the same period last year.
VAT receipts for the first three months of the year are up 8.4% compared to the same period last year.
The Department estimates that the impact of the second lockdown on spending has been about half that of the first lockdown last year.
However, the extend of the increase is affected by a reduction in VAT collected in March 2020 due to various support schemes introduced by the Revenue Commissioners at the onset of the pandemic.
Income tax continues to perform strongly with the amount collected up 4% in the first three months compared to the same period last year.
Spending on a cumulative basis is 14.5% higher than the same period in 2020 and €511 million ahead of profile.
Speaking at a press conference this afternoon, Minister for Public Expenditure and Reform Michael McGrath said the €5.4billion contingency funds set aside in the Budget will come under pressure over the next few months but he hoped the economy will also gradually reopen over that time.
He said the Government will not be introducing any “cliff edge” end to support schemes.
Minister for Finance Paschal Donohoe told the same press conference that the relatively strong tax figures “is a sign of cautious optimism for what the year can bring.”
When asked about the growing international support for a global minimum corporate tax rate, Minister Donohoe said the “focus on a minimum rate is a prospect that I do have concerns about …”
He said he had concerns about the impact on the competitiveness of small and medium sized economies. He said that “change is coming” and the pandemic “had made that change more likely.”
Mr Donohoe said a speech from US Treasury Secretary Janet Yellen shows “they’re focused on increasing their tax … that will have consequences for Ireland and we’ll need to plan for those consequences.”
A report by the Department of Finance has estimated that Ireland’s corporate tax take could be reduced by up to €2billion if certain rule changes are introduced at a global level.