The Irish exchequer has delivered a record €4.4bn in receipts to the Government, thanks to booming income tax receipts. This has made the Irish exchequer one of the wealthiest in Europe, with three of the four major tax sources outperforming expectations. The Government has set aside billions in reserve funds to fund considerable future spending needs.
Income tax receipts brought in just over €3bn in the month, up by €340m from a year earlier, indicating that recruitment and employment levels remain elevated, despite the European Central Bank hiking interest rates since last summer. Vat brought in slightly more from April 2022 levels, but corporation tax receipts and excise duties were both down. However, Vat and corporation tax receipts have boomed in previous months and are expected to bring in record amounts for the State this year.
The Government has collected €24bn in tax receipts since the start of the year, an increase of €3bn, or 14%, from the same period last year, while setting aside a further €4bn into the National Reserve Fund. “While April is a quiet month on the Vat front, year-to-date figures are 13% ahead of the same period in 2022, likely indicating strong consumer spending rather than inflation,” said Peter Vale, tax partner at Grant Thornton, in a commentary. “Corporation tax remains the star performer, with receipts now €1.3bn ahead of 2022, year to date. June figures will provide a good measure of expected full year corporation tax returns; a strong June would provide comfort that 2023 figures will surpass what was an exceptional 2022,” Mr Vale said.
Despite successive economic storms, including the pandemic and the cost-of-living crisis that led to a sharp increase in borrowing costs, the Irish economy has weathered the storm, according to numerous economic indicators and surveys. However, the ECB is widely tipped to increase rates again on Thursday as it fights to bring inflation under control. Meanwhile, a sharp fall in crude oil prices on Wednesday to $72.60 a barrel has delivered potential good news on prices pressures. If sustained, the 3.5% fall in crude should in a few weeks filter down to push prices lower at the petrol pumps. However, the sharp fall may signal the potential for a looming US recession as interest rates there bite.
There was worse news from European gas markets which showed wholesale prices rising again by the end of the year despite their sharp falls in recent months. According to futures markets, the price of wholesale gas for delivery in June eased to €37 per megawatt hour in the latest session. However, gas for delivery in December, although also lower in the session, traded at over €57.50 per megawatt hour, suggesting fears that Europe will face problems over supplies next winter. Gas is used across the continent to fuel power electricity generating stations. The shutting down of Russian supplies since the invasion of Ukraine over a year ago had forced the EU to seek supplies from elsewhere, and to promote measures to curb demand by industry and households.