Corporation tax revenues set to be bright spot in Covid-19 economic crisis

New figures will throw new light on the huge costs in supporting the economy and on the long-term pain as more households lose their jobs amid the Covid-19 economic crisis.

Exchequer figures published later today will likely show that a ballooning deficit of over €3bn in May as the €2bn-a-month cost in the pandemic unemployment and wage-support schemes are added to the continuing healthcare costs in fighting the pandemic.

A year ago, the budget deficit in the month was a negligible €62m, as Vat and income taxes poured into the exchequer.

May is one of the key months for the exchequer to collect Vat but revenues from this tax source will be a fraction of the €2.3bn collected in May 2019, even as income tax revenues hold up surprisingly well.

That’s because public sector workers and the highest-paid workers who proportionally contribute more to the income tax revenues have kept their jobs in the Covid-19 economic slump.

Nonetheless, May’s tax revenues revenue will likely bring major piece of good news for the beleaguered exchequer in that buoyant corporation tax revenues from multinationals are likely to go a long way in offsetting the slide in Vat and other major tax sources.

The exchequer figures are likely to show that corporation tax revenues have been boosted by the revenues of the global pharmaceutical and tech giants who have major bases in Ireland and whose global sales have surged during the pandemic.

Also later today, the CSO publishes the unemployment figures for May, which are likely to show that more than 10,000 people have joined the official claimant count last month.

In April, there were 214,700 people on the live register, up from almost 205,210 in March and 182,000 at the start of the emergency, in March.

The Government will be hoping that today’s figures will mark some sort of high watermark in the crisis, in the number of people needing supports.

Figures show that a total of close to 1.3 million people — equivalent to two-thirds of the private sector employment in the Republic — are in receipt of some sort of public payment during the pandemic.

Yesterday, the latest figures from the Department of Employment Affairs and Social Protection showed there were 543,200 people receiving the €350 a week pandemic unemployment payment, down by 36,200 in the past week.

However, the number of people availing of the wage-support scheme rose by 25,300 to over 508,100, according to the official figures.

Although suggesting that the number in receipt of Government payments may have peaked, there remains the huge danger that many people will fall into long term unemployment.

The official figures show that the largest groups on the pandemic unemployment payments are the 122,200 people who worked in accommodation and food service and the 80,900 who work in wholesale and retail.

Unlike construction workers who are returning slowly, accommodation and retail workers are not going back to work any time soon and are in danger of falling into long-term unemployment, as happened during the financial crisis.

Conall Mac Coille, chief economist at broker Davy, said the live register figures could mark the peak in the number claiming government payments.