The elevated levels of Corporation Tax became even more elevated in the recently-published Exchequer returns for August. On a rolling 12-month basis, the amount of Corporation Tax collected is now touching €28 billion – with the chart showing the 12-month sum needing the vertical axis to extended yet again (and probably not for the last time).
Incredibly, this means that the chart showing the cumulative totals by calendar year still works.
A chart showing 11 separate series should not work but, almost without exception since 2014, the cumulative year-to-date total for any given month has exceeded the equivalent amount for all earlier years. And when it briefly didn’t in October last year it was noted here that it was due to volatility and the pattern quickly resumed.
We can see the 2024 line scorching ahead of 2023 with record annual receipts again likely to be collected. The biggest month for CT is yet to come in (November) but the €16.3 billion already collected in 2024 is ahead of the full year total for every year up to 2021.
We will come to some of the reasons shortly but initially we can note that the annual growth in the 12-month sum is potentially beginning to spike again.
The last decade has seen three periods of significant growth (2015, 2018/19 and 2021/22). Whether 2024/25 joins them remains to be seen – and it will be from a much higher base. Growth in 2026 is almost fully baked in at this stage (Pillar 2 etc.)
Although other taxes are performing strongly, they are not growing as rapidly as CT, thus the share of Exchequer Tax revenue due to CT has also reached new heights. CT contributed just under 30 per cent of total Exchequer Tax in the 12 months to the end of August.
Volatility
We can see the impact of volatility if we just look at the monthly receipts for August. Up to 2020, August was not a significant month for CT revenues but this has changed in recent years.
August 2024 was up over 100 per cent on August 2023 but it’s actually not that much higher than August 2022 - if we have now reached the stage where €1 billion of additional tax in one month is not that much. It is a 20-foot container full of €50 notes!
As we have frequently pointed out, companies pay the bulk of their Corporation Tax in two installments, during their financial year (month six and month 11), with a final balancing payment due nine months after their year end. It can be instructive to combine the payments from months 6 and 11 for various different year ends.
Companies with a September year-end, will pay most of their Corporation Tax in March and August (months 6 and 11 of their financial year). Combining these months shows that timing, AKA volatility, may be, in part, responsible for the surge seen when August is looked at in isolation.
On a combined basis, we can see that the combined receipts for March and August are up on last year – but that this increase is close to 25 per cent rather than exceeding 100 per cent in the case of August alone.
The is likely to be some firm-specific circumstances that has seen the spread of payments between March and August vary in recent years – but as can be seen their combined sum is not as volatile. In 2023, a greater share of the payments seemed to be made in March whereas this year a greater share of the payments were made in August. For the year as a whole it largely washes out – that container of €50 notes excepted.
Therefore, we cannot read too much for the rest of the year into the 100 per cent growth seen in August. But we already have a pointer to what will happen in November, the most important month for CT – it will go gangbusters -again.
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