Government on course for record tax take despite inflationary surge

Turbo-charged corporation tax receipts, alongside strong growth in income tax and VAT, have put the Government on course for a record tax take this year.

The figures, published this afternoon by the Department of Finance, show tax revenue for the 10 months to the end of October stood at almost €64 billion. This was €13 billion or 25 per cent ahead of the same period last year, suggesting the economy is still performing strongly despite the corrosive impact of inflation.

Total tax revenue for the year is now expected to exceed €80 billion for the first time.

The strong figures were driven by record corporation tax receipts, which came in at €16.2 billion for the 10-month period, €6.6 billion ahead of the same period last year. The business tax took in €2.3 billion in October alone, €800 million more than the same month last year.

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“This increase primarily relates to profits in a small number of companies in the multinational sector, which are unlikely to be repeated next year,” the department said. The concentrated nature of the corporation tax base here, with just 10 firms accounting for 60 per cent of receipts, has been repeatedly highlighted as a potential risk.

The Government’s fiscal position was also boosted by strong income tax receipts, which, on a cumulative basis, came to €23.9 billion by the end of October. That was €3.2 billion, or 15 per cent, ahead of the same period last year, reflecting strong employment growth.

VAT receipts for the year to date stand at €15.5 billion, an increase of €2.9 billion, or 23 per cent, on the same period in 2021, reflecting the bounce back in retail spending since Covid. However, the department cautioned there was a significant base effect in the VAT figures “as the economy was still in lockdown through the early months of 2021, depressing VAT receipts and flattering the comparison”.

The stronger-than-expected numbers generated an exchequer surplus of €7.3 billion in October, a turnaround from a deficit of €7.4 billion this time last year, which equates to a year-on-year improvement of almost €15 billion.

On the spending side, current expenditure came to €61 billion for the 10-month period, €1.3 billion ahead of profile, which reflects the cost-of-living measures included in the budget and the cost of housing refugees from the war in Ukraine.

“The figures show that tax receipts remain strong at the start of the fourth quarter,” Minister for Finance, Paschal Donohoe said. “However, the strength of potentially volatile corporate tax receipts continue to provide an artificially positive picture of the public finances.

“As I have warned on many occasions, while these receipts are welcome, it is imperative that that Government does not build up permanent fiscal commitments on the basis of revenues that may prove transitory,” he said.

Minister for Public Expenditure and Reform, Michael McGrath said the expenditure figures reflected the increased funding provided by Government throughout the year to support public services, households and the economy.

“This demonstrates a responsive approach to the external challenges faced by our economy and society, including the ongoing response to Covid-19, the War in Ukraine and the increased cost of living,” he said.