An Exchequer surplus of €7.9 billion was recorded in the year to the end of September 2022. This compares with a deficit of €6.2 billion in the same period last year.
The €14.1 billion improvements in the Exchequer balance was primarily driven by a decline in COVID-related expenditure and by strong growth in tax revenue, with tax receipts of €57.9 billion to end-September, up €12 billion (over 26 percent) on an annual basis.
The annual increase is, in part, flattered by the stringent level-5 restrictions that were in place in the opening months of last year as well as a number of other technical factors.
At €21.4 billion to end-September, income tax receipts remain robust, up 16 percent compared to last year, reflecting continued momentum in the labour market.
Corporation tax receipts of €2.0 billion were collected in September, up almost €1.0 billion compared to the same period last year. This increase primarily relates to payments made this year on 2021 profits and therefore is not expected to carry forward into 2023 receipts.
Overall, corporation tax receipts amounted to €13.8 billion to end-September, up by €5.8 billion relative to last year. The annual increase in corporation tax reflects the continued strong momentum in activity in the multinational sector.
Reflecting the recovery in consumer spending, VAT receipts to end-September amounted to €15.3 billion, up almost 23 percent on the same period last year. However, the annual comparison is impacted by a number of factors including the public health restrictions that were in place last year. At the same time, VAT receipts were 24 percent higher than in the same period in 2019 (that is, pre-pandemic).
At €4.0 billion to end-September, excise duty receipts were down 2 percent on an annual basis. The much weaker performance of excise reflects, in part, government policy introduced to tackle increases in the cost of living.
Total gross voted expenditure to end-September amounted to €59.2 billion, €1.4 billion or 2.4 percent below the same period in 2021. This is driven by a decline in expenditure in the Department of Social Protection due to the impact of COVID-19 restrictions in early 2021 and the supports put in place at that time.
Gross Voted Current Expenditure was €54.3 billion and €847 million ahead of profile, reflecting largely non-core pressures including COVID-19 expenditure in Health and Education and the costs associated with accommodation for Ukrainian refugees in the Department of Children, Equality, Disability, Integration, and Youth.
On a 12-month rolling basis — a better indicator of the trend — the Exchequer recorded a surplus of €6.8 billion in September.
Commenting on the figures, the Minister for Finance Paschal Donohoe said:
“Today’s figures show that tax receipts remained robust in the third quarter. The strength in income tax, in particular, is a positive signal of the continued momentum in the labour market. However, the strength of potentially volatile corporation tax receipts provides an artificially positive picture of the public finances.
“To be clear, these receipts are, of course, very much welcome, and reflect well on Ireland as an attractive location for highly profitable multinational firms. But, as I have warned many times, these receipts are highly concentrated among a small number of companies and, as such, are subject to extreme potential volatility and cannot be guaranteed at current levels into the future.
“Indeed, my department estimates that excess corporation tax receipts – that is the amount that cannot be explained by underlying drivers and, therefore, may be more vulnerable to a shock – could amount to somewhere in the region of €8-10 billion this year. If these ‘windfall’ receipts were excluded a significant deficit would be in prospect this year.
“In order to rebuild our fiscal buffers we will start replenishing the National Reserve Fund with some of these excess receipts. This year €2 billion will be directed into the Fund. Next year, €4 billion will be transferred.”
The Minister for Public Expenditure and Reform, Michael McGrath, said:
“The end September expenditure figures show the continued support provided by Government for public services, households, and the economy. There has been significant investment in our public services and a responsive approach to the changing challenges of the pandemic throughout the year.
“Our economy and society have faced new challenges in the first eight months of the year. Government has introduced a range of support as a result of these challenges including humanitarian support for refugees from Ukraine and supports for households and families facing significant increases in the cost of living.
“Government policy has remained responsive while ensuring fiscal sustainability is maintained. Last week we announced Budget 2023 which outlined a series of both once-off and permanent core expenditure measures to help people and businesses facing a cost of living challenges.
“These measures are only possible because of the strong economic recovery from COVID-19 and careful management of the State’s finances.”