The Irish Government has collected a record €19.7bn in tax revenues in the March quarter, marking a €2.5bn increase from the previous year. The surge in VAT, income, and corporation tax receipts indicates that the economy is withstanding the cost-of-living crisis and the shakeout of tech jobs. Despite rising borrowing costs and the highest consumer price inflation in decades, the Economic and Social Research Institute, the Central Bank, the European Commission, and other forecasters are projecting strong growth for the Irish economy this year.
The growth in economic activity creates a larger pool of taxable revenues for the Government. The outsized performances of VAT and, in particular, corporation tax receipts were again in the spotlight in the latest exchequer returns. VAT receipts in the quarter climbed to €6.8bn, up 16% from a year earlier, suggesting that government tax revenues on spending and consumption are rising much faster than the level of inflation. Recent surveys suggest that consumer spending is holding up well, although the burden of severely squeezed personal finances is likely to be shouldered by low-income households.
Corporation tax revenues increased by €1.3bn, or over 70%, from the same quarter last year, despite the opening months of the year not traditionally being major months for large companies to pay their tax bills. The Department of Finance said some of the corporation tax haul this quarter was accounted for by firms paying at an early stage. The figures provide further evidence that the stellar performance of corporation tax receipts, which brought in a record tax haul of €22.6bn last year, is showing few signs of slowing this year.
Income tax receipts surged by 8% to €7.4bn in the latest quarter, and have been closely watched for signs of any effects of the recent shedding of jobs by tech giants. Concerns had been raised about the effects of multinationals shedding relatively highly-paid tech staff. However, other parts of the economy such as hospitality and tourism were recruiting, and unemployment is expected to remain around historically-low levels despite the economy having gone through the pandemic years and now surging inflation.
Excise duties, which are one of the big four tax sources for the Government, rose over 4% to bring in €1.3bn in the latest quarter. Gross voted expenditure rose 5% to €19.8bn, and the exchequer posted a deficit of over €2bn in the quarter, but only after €4bn had been taken out from ballooning corporation tax receipts to feed the National Reserve Fund.
The positive results of the exchequer returns will help underpin recent projections by the Economic and Social Research Institute, the Central Bank, the European Commission, and other forecasters that the Irish economy will grow strongly this year. The forecast for the Irish economy is 5.5% growth this year, and by 6% in 2024.