Wednesday, July 3, 2024

CT receipts go gangbusters - again

Can we really keep saying that? We might have expected an increase in June but the outturn was exceptionally strong.  For a single month, the €5.9 billion collected in June is second only to the €6.3 billion collected last November.  

As shown below, June 2024 was by far the largest June on record.

Of course, as we discussed earlier, the June receipts are also a pointer to what might happen in November.  Here’s what happens if we extend the June/November relationship for the outturn we have just seen for June 2024: a fitted value for November 2024 of €8.2 billion – which alone would be equivalent to the entire amount of CT collected in 2017.

The strong June means that 2024 is now considerably higher than 2023.  In the first six months of 2024 €12.2 billion of CT has been collected.  On its own this would be the fourth-highest full year ever – and there are still six months to go.

It is pretty likely now that the sequence of calendar year CT receipts exceeding the previous year will be extended to 13 years (back to 2012).

The June outturn was enough to push the rolling 12-month sum up to a new high of €25.5 billion.

The next month of interest will be August when we will see how much the fruit harvest brings in.

The continuing elevated levels of Ireland's Corporate Tax receipts

Ireland’s Corporation Tax revenues have been at an elevated level for some time. For the past 18 months their 12-month rolling sum has hovered around €24 billion, with little more than volatility causing it to move slightly up and down.
There is no clear recent trend, but the chart of calendar year outturns could be set for another year with an annual increase. It is 2011 since the amount of Corporation Tax collected in a year was lower than the preceding year. Here are the outturns since 2014, with the line for each subsequent year being higher than the last.
2024 did slip slightly behind 2023 in March and April, but this was made up by a strong May. The month receipts in May 2024 of €3.6 billion were the highest May on record.
May is a significant month for CT receipts but it is not generally a useful pointer for receipts for the year as a whole. May is month 11 for companies with an end-June year-end so has greater links with December of the previous year (month 6 for such companies). June is both a significant month for CT and a pointer for receipts for the year as a whole. June is month 6 for companies with an December year end, with November being month 11 for them. Large companies pay the bulk of their Corporate Tax in two preliminary payments during the year. These payments are made in month 6 and month 11 of the companies’ financial years. Here are the monthly receipts for June and November (and a fitted line) since 2009. The relationship is clear.
What will June 2024 bring? It is hard to know. As set out at the beginning the fluctuations in CT have been due to the volatility that can be expected in such a concentrated series (the top 10 payers account for more than 50 per cent of total CT receipts). The year-on-year monthly comparisons are pretty wide. Obviously, most of them have been positive in recent years, but certainly not all. There have been months where the amount collected was significantly down on the same month in the previous year. But this has typically not been those months that are important for CT – such as May, June and November (though other months such as March and August are starting to join them).
And we can see above that the range of changes has been a bit lower over the past 18 months or so. All-in-all, it probably points to June 2024 being relatively close to June 2023, maybe +/- 10 percent, which in turn points to yet another high return in November. And if there is to be a surprise, it may be on the upside.

Friday, May 17, 2024

Annual Volume of Market Purchases by FTBs Tops Out at 17,500

Figures released with the CSO’s March update of the Residential Property Price Index point to the volume of market purchases by FTBs topping out at 17,500 on an annual basis.

In the 12 months to January 2024, stamp duty filings were made for 17,496 purchases by first-time buyers.  For March, the equivalent annual figure dipped to 17,275, a reduction of just over 200.

This reduction is due to a fall in the number of existing dwellings purchased by FTBs.  The number of new dwellings has remained in and around 5,400 on an annual basis for the last year or so.

A local peak for FTB purchases of existing dwellings was reached in October of last year with 12,242 stamp duty filings made in the year to that month.  The latest figures for March show this 12-month sum declining to 11,891, a fall of around 350.

Since Census Night 2022 (April 3rd) just over 34,000 stamp duty filings have been made for market purchases by FTBs, giving a run-rate of around 330 per week.  Non-market transactions, self builds and bequests will give further first-time owners.

Friday, May 3, 2024

Ireland’s largest taxpayer motors along

OK, we can’t be 100 per cent sure that Microsoft Ireland Research is Ireland’s largest taxpayer but it certainly is a likely candidate for being so.  The 2023 accounts are now available and like last year continue to paint a strong picture.  Let’s start with the income statement:

From 2019 to 2023, turnover pretty much doubled (after previously doubling from 2017 to 2019).  Operating costs haven’t increased as rapidly with operating profits increasing by around two and a half times since 2019, to reach $23.3 billion.

In recent years, the tax charged in the income statement has been around 12 per cent of operating profit plus net interest income. This continued to be case in 2023.

At $2.9 billion, Microsoft Ireland Research (MIR) is likely responsible for around ten per cent of Ireland’s Corporation Tax revenues and something a little north of two per cent of general government revenue.  MIR has also seen its non-financial footprint increase here in recent years.

In 2023, Microsoft Ireland Research had an average of 1,242 employees and incurred an aggregate of $157.7 million of expenses on wages and salaries.  This gives an implied average of $127,000 per person employed.  In total aggregate staff costs were $234.7 million once PRSI, pension costs and share-based remuneration are factored in.

We are primarily interested in Microsoft Ireland Research because of the size of its tax charge. It does not have the highest amount of Microsoft’s employees in Ireland.  That impact belongs to Microsoft Operations Ireland Limited which had an average of 2,779 persons employed in 2023 (2022: 2,386). 

In 2023, MIOL incurred wages and salaries costs of $340 million at an average of $122,400 per person employed.  On top of that MIOL had a tax charge of $652 million, up from $476 million in 2022.

Combined MIR and MIOL, had a tax charge of $3.5 billion in the twelve months to the year ended June 30th 2023.  Add in $700 million of total staff costs and we’re at $4.2 billion.

Thursday, April 25, 2024

Recent changes in the tenure status of households headed by an Irish or UK national

This is a companion to the previous post which looked at changes in the homeownership rates in the 1991 and 2022 censuses. Here we look at more recent changes in the tenure status for households headed by an Irish or UK national using figures kindly provided by the CSO.

From Census 2016 to Census 2022 the number of households enumerated headed by an Irish or UK national increased by 83,293, or 5.5 percent.  In 2022, these were 87 percent of the total households enumerated (and 89 percent of households where the citizenship of the reference person was provided, i.e. excluding “not stated”).

Here is the tenure status of households headed by an Irish or UK national in the last two censuses.

When looking at the changes, by far the largest absolute increase was for owner-occupiers, whose number increased by 48,522 over the period.  There was a rise in the number of outright owners without a loan or mortgage and a decline in the number of owner-occupiers with a loan or mortgage. 

In relative terms, the number of owner-occupiers rose by 4.4 per cent.  With the total increasing by 5.5 percent, this results in a decline in the home-ownership rate for this group from 75.3 percent in 2016 to 74.8 percent in 2022.  Households whose tenure status is “not stated” are excluded from the determination of the tenure rates shown in the table.

The next largest absolute increase was for social housing tenants. The number of households who are tenants of local authorities or approved housing bodies shows a rise of 20,741 over the period.  This is a 14.5 percent increase and resulted in the the share of households headed by an Irish or UK national who were local authority or AHB tenants increasing from 9.6 percent to 10.5 percent.

The next largest increase was for households who occupied a dwelling free of rent. There were a further 3,643 such households in 2022, though these remained less than two percent of all households headed by an Irish or UK national.  These are likely to arise due to intra-familial arrangements where the owner and occupier of the dwelling differ.

Of the possible occupancy statuses, the smallest absolute increase for households headed by an Irish or UK national was for those renting from a private landlord.  There were just an additional 360 such households in Census 2022, an increase of 0.2 per cent.  The share of these households declined from 13.4 percent in 2016 to 12.8 percent in 2022.

This does not tally with a property-owning democracy being replaced by a rent-paying one.

Indeed, related findings from the census indicate that we need more rental dwellings not fewer.  On Census night 2022, 33 percent of 25 to 29 year-olds were enumerated at their parents’ house.  The equivalent figure from 2011 was 24 percent. 

If the share of 18 to 35 year-olds living with their parents had stayed at the level it was in 2011, then almost 100,000 more young adults would have left the family home.  The number of households with a reference person aged under 35 declined from 367,000 in 2011 to 255,000 in 2022.

Part of this is demographics and aging, but a lot of it is due to the shortage of housing.  The share of the population aged 20 to 34 has declined from 23 percent to 18 percent.  However, the share of households with a reference person under 35 has declined from 22 percent to 14 percent.  If the share of households had just tracked population change there would be 70,000 more households with a reference person aged under 35.

If we were to crudely apply the actual tenure status rates from Census 2011 for the under 35s, then these additional 70,000 households would be split as 35,000 private rentals, 25,000 owner-occupiers and 10,000 social rentals or occupied free of rent.  However, the extra 100,000 still living at home are not the same as those living independently.

Most people when they leave the family home go initially to rental accommodation. Some of those still in the family home may be looking to buy, but most would choose to rent if reasonable options were available.  Ireland needs more of all types of housing but options for renters are far more restrictive then they are for buyers. 

The very large increase in the number of young adults still living at home can be addressed by providing more rental accommodation for these people to move out to.  At a point in time, private renting is a legitimate form of tenure status and is no less deserving of being provided for. However, almost all commentary and pretty much all policy is aimed at owner-occupiers. Units provided for renters are considered a "home lost".

As the opening table of the post shows, since 2016 there has been an 48,500 increase in the number of households headed by an Irish or UK national who are owner-occupiers.  Over the same period the number of such households who are renting privately increased by 360. 

For every one additional household headed by an Irish or UK national who became a private renter, 135 became owner-occupiers. 

In the inter-censal period, April 2016 to March 2022, separate CSO figures show that there were 79,500 market transactions by first-time buyers.  On an annual basis these are currently running at 17,500 per 12-month period.

If we look at the homeownership rates derived from the census we can see the decline in recent decades.  However, most of this decline took place in the first decade of this century. 

From Census 2002 to Census 2011 the homeownership rate declined from 80 percent to 71 percent.  From Census 2011 to Census 2022 the decline levelled out considerably with a further fall to 69 percent. 

Part of the reason the decline is moderating is because people are staying in owner-occupied houses for longer – their parents’ houses.  With more options, people could get out of the family home and set up their own one-person or two-person households – in suitable rental accommodation.  They could then look to join the buying brigade down the line.

Just how upside down things have got can be see by these two recent postings on

These two 2-bed apartments are a short distance from each other in the Douglas area of Cork city.  The property for sale is listed at €275,000. The property for rent is listed at €2,200 per month.

At an interest rate of five percent, over 20 years, the monthly repayment on a mortgage of €240,000 would be €1,600 per month.  That’s €600 a month to help cover the additional costs of being an owner-occupier, though obviously without the flexibility of being able to move easier.

If the sale and letting were to happen at the advertised prices it would give a price-to-rent ratio of just over ten.  By international and recent historical standards in Ireland this is low. Remember this?

Again, something does not feel right.  Then it was prices that were far too high; now it is rents.

There is lots of evidence that the squeeze is most acute in the private rental sector.  As shown in an earlier post here are the housing-cost overburden rates for renters and mortgagors across the OECD.

And this only reflects those who are actually in rented accommodation.

To repeat what we saw at the start.  Since Census 2016, there are an extra 83,300 households headed by an Irish or UK national. Of these, the increase can be split as:

  • 48,500 owner-occupiers
  • 20,700 social housing tenants
  • 3,600 occupied free of rent, and
  • 360 private renting

with a 10,000 increase in the number of “not stated”. If a ratio of 135:1 is the natural order of things, then fine, but it seems more than a little extreme and is just going to result in more young adults having to stay at home for longer.