Government runs record €8bn budget surplus in 2022 as tax revenue surges

The Government ran a record budget surplus of €8 billion last year as strong tax revenues offset the additional spending on Covid and energy-related supports. This follows two years of successive deficits (-€6.8 billion in 2021 and -€18.7 billion).

According to the Central Statistics Office (CSO), the general State balance returned to a surplus of €8 billion in 2022, the highest since the series began in 1995.

The year-on-year improvement was driven by a “strong recovery in taxes”, the CSO said. The Government’s improved fiscal position was driven in the main by record corporation tax receipts, which rose to €22.6 billion last year.

The figures show that total Government revenue in 2022 was €115.5 billion, €16.6 billion higher than the previous year while Government expenditure reached €107.5 billion, €1.8 billion more than the previous year.

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The increase in spending was “mainly due to increased compensation of employees and intermediate consumption, with reductions in the level of subsidies in the year”, the CSO said.

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In its latest Stability Programme Update, published this week, the Department of Finance projected a budget surplus of €10 billion for this year, rising to €16 billion in 2024, on the back of a further surge in corporate tax receipts, which are expected to hit €24 billion this year.

Without the corporate tax windfall, the Government would, all things being equal, run a deficit of €1.8 billion this year, the department said.

[ Surging corporation and income taxes have left the exchequer in a strong position - the resulting room for manoeuvre must be used wisely ]

The CSO figures show that gross general government debt fell by €11.4 billion to €224.8 billion at the end of 2022. This is equivalent to 44.7 per cent of gross domestic product (GDP), down from 55.4 per cent of GDP a year earlier.

Since 2019, the level of debt has increased by €21.4 billion, largely reflecting the outlay on Covid-related supports.

The current debt-to-GDP ratio remains below the European Union’s Stability and Growth Pact threshold of 60 per cent “largely due to the continued strong performance of GDP in the year”, the CSO said.

The healthy state of the public finances has triggered expectations of further supports for energy-squeezed households and the possibility of tax cuts in the upcoming budget.

However, at the publication of the SPU earlier this week both Minister for Finance Michael McGrath and Minister for Public Expenditure Paschal Donohoe played down talk of big budget giveaways. They warned in particular of the unreliable nature of much of the corporation tax receipts and the danger of building recurring spending commitments on the back of revenues that may be temporary.

Officials in the Department of Finance now say that up to €12 billion of the expected €24 billion in corporation tax receipts this year could potentially disappear in future years.