Surging tax revenues provide Government with unprecedented war chest ahead of budget – The Irish Times

Surging tax revenues have boosted the Government’s financial position and provided it with an unprecedented war chest ahead of the budget later this month.

Monthly exchequer returns published on Friday evening by the Department of Finance show a surplus of €6.3 billion at the end of August, a development likely to pile the political pressure on Government to unveil a big cost-of-living package when it delivers the budget.

While Ministers have agreed to limit increases in recurring expenditure in the budget, there is now increasing scope for one-off measures which have been repeatedly promised by the Government to deal with the cost-of-living crisis and which some sources say will exceed – and possibly far exceed – €1 billion on budget day. It is expected that these initiatives – expected to include further energy credits – will be implemented soon after the September 27th budget.

But there is also likely to be a push from the Department of Finance to divert some of the surplus into the State’s “rainy day fund” which was raided to help deal with the cost of the Covid-19 pandemic.

The three leaders of the Coalition parties are due to meet next Tuesday, and sources say that Government is likely to lay out the thrust of its cost-of-living plans after it meets on Wednesday.

Tax revenue for the eight-month period stood at €49.8 billion, which was €10.4 billion or 26 per cent ahead of the same period last year. It was also the highest tax-take for the first eight months of any year. The increase was driven by continued growth in corporation tax, income tax and VAT.

The latest exchequer figures show corporation tax generated €11.8 billion for the eight-month period, more than €4.8 billion ahead of the same period last year. The department said the performance was driven by “significant increases in profitability in the multinational sector”. Business tax receipts are expected to hit a record €18 billion this year.

On a cumulative basis, income tax brought in €19.2 billion, 16 per cent up on the same period last year, reflecting the strength of the labour market, which is now close to full employment.

Separately, The Irish Times has learned of proposals to hit tourists with an extra charge for every night they spend in the country.

The recommendation for an “accommodation tax” is contained in the unpublished report of the Commission on Taxation and Welfare, and is modelled on similar charges in other European capitals, including Paris, Berlin and Vienna.

The tax, if it were introduced, would undoubtedly lead to a backlash from the hospitality industry. However, the commission’s report argues that under the “polluter pays” principle, tourists should be hit with a levy for services they use while in the country but don’t fund.

While no specific level is recommended for the tax, the report notes that across EU member states an average of €0.40-€2.50 per night applies, which varies depending on the type of accommodation provided.

Outlining the logic for the charge, it says that “tourists and other visitors get a short-term benefit from public goods and services, such as water and sewerage systems, utilities, waste facilities, parks, security and public safety services, without having contributed to their funding”.

Meanwhile, officials in the Department of Finance are eyeing the bumper exchequer receipts as a source to help replenish the Government’s rainy day fund. A further payment of €500 million in 2022 and 2023 is already legislated for – although payments in 2020 and 2021 were suspended due to the pandemic. Another gap would require a Dáil vote to circumnavigate the obligation to pay as was done for the past two years.

Well-placed sources said there was a push under way for an even higher figure than €500 million to go into the rainy day fund given the grave warnings from a variety of economic advisers to the Government about the concentration of the corporate tax take in a small number of taxpaying companies.


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