Jim O'Callaghan
Question:107. Deputy Jim O'Callaghan asked the Minister for Finance the likely impact of the move to level 5 restrictions on tax receipts for the rest of 2020. [39186/20]
View answerThursday, 26 November 2020
Questions (107)
Written answers
My Department has estimated a cost of €1.5 billion to the Exchequer as a result of the level 5 restrictions. The estimated cost arises from both an increase in public expenditure and a decline in tax receipts. There is a considerable amount of uncertainty in relation to this estimate, depending on, inter alia, individual take-up, firm-level decisions and sector specific impacts.
Reflecting a steep fall in personal consumption, the previous period of the most stringent restrictions led to a significant decline in VAT and Excise duties. I expect the same will happen in respect to the latest restrictions, although some of the high frequency data published by the Department show the impact is likely to be less severe than in the spring.
A further consideration is the operation of the Covid Restrictions Support Scheme (CRSS). In the past two months, tax receipts have been withheld by the Revenue Commissioners in order to facilitate payments under the scheme, which was announced by the Government in Budget 2021 to provide support to businesses that are affected by the restrictions. As such, the CRSS 'artificially' dampens tax receipts.
VAT is the primary channel through which the impact of level 5 will be felt on tax receipts. As it is paid with a two-month lag, the likely impact will not be known until January receipts are collected.
I will publish the taxation receipts for the fourth quarter early in the new year.