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Covid 19

Coronavirus punches €800m hole in public finances

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The Government’s finances have been hit hard by the coronavirus crisis with tax receipts for March coming in nearly €800 million below profile.

The Department of Finance also warned that the State’s financial position would deteriorate further in the coming months as the full economic impact of the containment measures materialised.

The latest exchequer returns, published by the department this afternoon, show the Government collected €12.9 billion in tax in the first three months of the year. But this was €788 million below what the department had originally forecast.

The main drag was VAT, which was €986 million below profile at €4.1 billion. The sales tax was also 50 per cent, or €1.1 billion, below expectations on a monthly basis.

The Department of Finance said VAT receipts were “sharply under profile as a result of the response to Covid-19”.

Income tax was less severely affected, coming at €5.6 billion for the three-month period, which was just €60 million or 1.1 per cent less than had been forecast.

However, this is expected to worsen significantly in the coming months with rocketing unemployment.

Corporation tax, which hit a record €11 billion last year, came in 68 per cent above profile at €870 million, but most of business tax revenue comes later in the year.

Deficit

The figures left the exchequer with a deficit of €2.5 billion in March compared to a deficit of €966 million for the same month last year.

“At this early stage the full economic impact of the Covid-19 pandemic has not yet been manifested in taxation receipts,” the department said. “It is likely that revenues will continue to deteriorate significantly over the coming months.”

The department also said that in light of the ongoing pandemic, it would be necessary to recalculate the monthly taxation profiles to reflect “the new fiscal reality”.

This will be carried out as part of the production of the Stability Programme Update 2020, due out later this month, it said.

From The Irish Times.