The Government’s financial position has been boosted ahead of the budget following another strong set of exchequer returns. The latest figures from the Department of Finance show the exchequer recorded a surplus of €6.3 billion for the eight months to the end of August, up from a deficit of €6.7 billion this time last year. The €13 billion turnaround was driven by higher tax returns and lower levels of Covid-related expenditure.
Tax revenue for the eight-month period stood at €49.8 billion, which was €10.4 billion or 26 per cent ahead of the same period last year. It was also the highest tax-take for the first eight months of any year. The increase was driven by continued growth in corporation tax, income tax and VAT.
The strong performance is expected to intensify pressure on the Government to do more in the budget to offset the current cost-of-living squeeze. Ministers for Finance Paschal Donohoe and Michael McGrath are expected to allocate €1 billion to once-off measures as part of their budgetary package later this month but the figure could be higher. A double child allowance payment and another energy credit to help households deal with spiralling costs are among the measures being considered.
The latest exchequer figures show corporation tax generated €11.8 billion for the eight-month period, more than €4.8 billion ahead of the same period last year. The department said the performance was driven by “significant increases in profitability in the multinational sector”. Business tax receipts are expected to hit a record €18 billion this year.
On a cumulative basis, income tax brought in €19.2 billion, 16 per cent up on the same period last year, reflecting the strength of the labour market, which is now close to full employment. VAT receipts for the eight-month period stood at €12.2 billion, an increase of €2.3 billion, or almost 24 per cent on the same period in 2021.
The department, however, cautioned that there was a “significant base effect” in the latest sales tax figures as the economy was still in lockdown through the early months of 2021, depressing VAT receipts and flattering the year-on-year comparison.
There has also been a significant deceleration in VAT receipts since July amid warnings that inflation and higher living costs are likely to negatively impact consumer spending as the year progresses.
On the spending side, total expenditure to the end of August was just under €60 billion. Of this, gross voted expenditure stood at €51.5 billion, which was €1.9 billion below the same period in 2021, helped by reduced expenditure on Covid-related supports, which have now been phased out.