The state finances were buttressed in 2021 by a record €68.4 billion tax take that exceeded expectations, pushed by robust company and revenue tax returns because the financial system rebounded..
The exchequer is expected to record a deficit of €7.4 billion for the complete 12 months with authorities expenditure of €87.5 billion exceeding the State’s tax receipts, according to exchequer returns for December published by the Department of Finance this afternoon.
This compares with an exchequer deficit of €12.3 million in 2020. The December figures complete the set for 2021 and provided us a clearer image of the impact of the second pandemic year on the State’s finances. The general government deficit was projected to be €13.3 billion for 2021 in the Budget, so today’s estimate was €5.9 billion lower.
The overall or ‘general’ Government deficit — as opposed to the exchequer deficit — includes non-exchequer spending and other transactions.
But today’s figures show the Government took in €68.4 billion in tax in the year to the end of December, up €11.2 billion (almost 20%) on 2020.
Income tax receipts — which were up €2,956 million or 17.4% on 2020 — remain the largest, most lucrative tax head.
VAT receipts completed the 12 months at €15.4 billion, up 24% in contrast with 2020 reflecting the restoration in shopper spending.
Corporation taxes — up €3,492 million or 29.5% on the previous year — mostly paid by high-powered MNC’s in the pharmaceutical and tech sectors, also made a strong contribution.
In the year 2021, the Government signed up to a global agreement to reform corporation tax, negotiated by governments at Organization for Economic Cooperation and Development (OECD).
Ireland’s corporate tax has grown considerably in recent years and now accounts for about 20% of the State’s total tax take.
The Department of Finance has estimated that implementing the terms of the OECD reforms could eventually cost the State up to €2 billion annually.
Speaking at the announcement of the exchequer returns today, both Finance Minister Paschal and the department’s chief economist John McCarthy said the effect of those reforms would not begin to be felt this year but in 2023.