04/01/23

IRELAND: Exchequer collected record €83bn in tax last year.

As published on rte.ie, Wednesday 4 January, 2023.

The Exchequer collected a record €83.1 billion in tax last year, according to figures published this evening by the Department of Finance.

That is €14.7 billion ahead of the previous record set in 2021, an increase of 21.5%.

The increase is put down to higher levels of corporation tax, income tax and VAT.

The figures show that for 2022, there was an Exchequer surplus in the public finances of €5 billion.

This compares to a deficit in 2021 of €7.4 billion.

According to the Department of Finance, this puts the general Government balance on course to record a surplus of €5.2 billion.

However, if 'windfall' corporation tax receipts were excluded, there would be a deficit of €5.25 billion.

The figures also show a record amount of corporation tax collected of €22.6 billion, up €7.3 billion (48%) on 2021. Corporation tax is now the Exchequer's second largest source of taxation.

Minister for Finance, Michael McGrath said the corporation tax receipts are very much welcome because they highlight Ireland's attractiveness for highly profitable multinational firms. However, he said they are highly concentrated in a small number of companies and represent an artificially positive picture of the public finances.

He said €10.5 billion in corporation tax could potentially be at risk. "Excluding these volatile receipts, instead of a surplus o €5.2 billion, we would instead be facing a significant deficit of €5.25 billion," the Minister said.

"This is a serious vulnerability in our public finances and the Government is acting to address this."

The Government plans to add a further €4 billion in windfall tax to the National Reserve Fund, on top of the €2 billion added in November.

Income tax came in at €30.7 billion, up just over €4 billion (15.2%) on 2021 while VAT came in at €18.6 billion, up €3.2 billion (20.5%) on 2021.

This reflects the recovery in the economy after Covid restrictions were lifted.

Peter Vale, Tax Partner at Grant Thornton Ireland said perhaps surprisingly, VAT receipts also remain strong, with full year figures almost 21% ahead of 2021.
He said it's worth noting, however, that it will be next month before we see the returns for the crucial Christmas period.

"The higher VAT receipts are driven by a combination of factors, including price inflation, higher disposable incomes and a slight dip in savings levels as the year progressed. Looking ahead, it’s likely that higher mortgage interest bills will impact adversely on disposable income and consumer spending, resulting in some pressure on VAT receipts in 2023."