Public finances in rude health as tax receipts defy global slowdown

The Government received an early Christmas gift yesterday with the latest exchequer data pointing to another surge in corporation tax as well as above-profile increases in income tax and VAT.

The figures show total tax receipts for the 11 months to the end of November amounted to €82 billion, which was €4.5 billion (5.8 per cent) ahead of the same period last year.

This puts the Government on course to at least meet or exceed a projected budget surplus of €8.8 billion for 2023 and comes against a backdrop of slowing global growth and tighter financial conditions as a result of the European Central Bank’s interest rate hikes, which had been expected to limit the Government’s tax revenue.

A total of €15.6 billion was collected in November alone, €2 billion or 15 per cent higher than in the same month last year.

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November is a key month for tax receipts as it is the biggest month for corporation tax and also incorporates returns from self-assessed taxpayers.

[ Corporation tax receipts defy slump predictions with record €6.3bn haul in November ]

The strong performance last month was driven by a strong corporation tax receipts, which generated €6.3 billion in November and €22 billion for the year to date.

“After three months of decline, a large increase in receipts this month means this revenue stream is once again comfortably ahead of last year,” Minister for Finance Michael McGrath said.

He warned, however, “the era of persistent over-performances is coming to an end”.

The better-than-expected performance was cemented by income tax and VAT receipts, which were also up on the same period last year and ahead of predictions.

On a cumulative basis, income tax generated just over €30 billion, which was €2.1 billion (7.3 per cent) ahead of the same period last year, reflecting the fact the economy is still operating at close to full employment. The sales tax generated €20.1 billion for the year to date, up €1.6 billion (8.6 per cent) on the same period last year.

After three consecutive months of heavy declines, a significant bounce in corporation tax receipts in November removes fears that the embarrassment of riches was coming to an end

—  Dermot O'Leary - Goodbody economist

Overall, an exchequer surplus of €5.4 billion was recorded in November. This compares with a surplus of €12.1 billion in the same period last year, with the deterioration driven by a number of factors including increased public expenditure and the transfer of €4 billion to the National Reserve Fund (NRF) in February.

“After three consecutive months of heavy declines, a significant bounce in corporation tax receipts in November removes fears that the embarrassment of riches was coming to an end,” said Goodbody economist Dermot O’Leary.

“The improvement in corporation tax receipts in November suggests that the weakness over the previous few months was down to specific cases rather than a wider trend. With the rate charged to larger companies to increase from next year, Ireland may further benefit from increased corporate tax in 2024,” he said.

Tom Woods, head of tax at KPMG said the strong income tax receipts were “consistent with the exceptionally strong labour market at near full employment evident throughout 2023, which saw 100,000 new jobs added over the year.”

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