Record tax take and end of Covid supports cut government deficit by 40%

The government deficit was reduced by almost 40 per cent in the second quarter of this year compared with the same period in 2021, driven mainly by a record tax take and the termination of Covid-19 supports, data from the Central Statistics Office (CSO) shows.

The State’s tax revenue increased to €20.7 billion over the three-month period, which was €2.7 billion higher than the second quarter of 2021. It was the highest-second quarterly tax figure ever reported.

Expenditure on Covid-19 measures continued to decrease, reaching about €1.1 billion in the quarter, which was €2.4 billion less than the spend during the same period last year.

[ Lack of checks led to ‘significant’ ineligible PUP claims during pandemic ]

The reduction was mainly due to the closure of both the pandemic unemployment payment (PUP) and the employment wage subsidy scheme (EWSS). About €100 million was paid out under the EWSS, down from €2.6 billion last year.

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The full €2.7 billion outlay for the defective concrete blocks grant scheme — otherwise known as the Mica redress scheme — was recorded in the quarter. That was the main driver of a €2.5 billion increase in expenditure on the same period in 2021.

With revenue of €27 billion — up €3.4 billion (14.3 per cent) on last year — and expenditure of €28.4 billion, the government deficit stood at €1.4 billion in the quarter. That was an improvement on the €2.3 billion deficit in the same period in 2021.

Taxes and social contributions made up 94 per cent of government revenue. Revenue from these categories increased by €3.3 billion, almost the entirety of the year-on-year increase, to reach €25.4 billion.

Taxes on income, profits and capital gains increased by €2.7 billion, mainly due to higher receipts from income tax and corporation tax, while social contributions, mainly PRSI receipts, climbed by €600 million.

On the expenditure side, at €28.4 billion, the quarterly outlay was €2.5 billion higher than the same period last year. There was a large reduction in expenditure on social benefits, which decreased by €400 million with the closure of the PUP.

The government gross debt to gross domestic product ratio was at 51.4 per cent at the end of the quarter, which represented a decrease of 7.5 percentage points from the end of the same period last year.

With nominal debt increasing by €2.1 billion, this reduction was driven entirely by an increase in GDP. Over that same time frame, the government net debt to GDP ratio moved from 48.6 per cent to 41.1 per cent.

Separately, the CSO published data that confirms the government deficit for 2021 was €7.1 billion (1.7 per cent GDP), which was an €11.7 billion improvement on the 2020 deficit of €18.8 billion.

The improvement was driven by a €15.5 billion (18.7 per cent) increase in revenue to a record high of €98.7 billion, with a €14.1 billion increase in taxes compared to 2020.

Expenditure increased by €3.9 billion (3.8 per cent), but the €12.5 billion outlay on Covid-19 measures for 2021 was €2.2 billion less than in 2020.

Government gross debt stood at €236.1 billion at the end of 2021 (55.4 per cent of GDP) compared with €217.7 billion in 2020 (58.4 per cent of GDP).