Corporation tax may make the headlines but income levy does some heavy lifting

Another month, another good set of exchequer figures. The tax take remains well ahead of target, up by more than 14 per cent in the first four months of the year. As has been the case in recent years, corporation tax remains a big factor. A key indicator here will come in June, when we will get the first indication of profit – and thus tax – expectations of the big players for 2023.

But another tax heading is also remarkably strong, with income tax up by 9.5 per cent in the first four months. Fears for the jobs market post-Covid are now well and truly forgotten, with unemployment remaining around record lows and labour shortages remaining in many areas of the economy.

While corporation tax has taken the headlines, running a cool 55 per cent ahead so far this year, the larger cash amount collected by income tax makes its steady rise all the more important.

Out of the €24.14 billion collected in tax so far this year, €10.4 billion has come from income tax and USC and the total for the month of April was particularly strong, up by 12.5 per cent. This to an extent also underlines our reliance on multinationals, providers of some of the best-paid – and thus most taxed – jobs. But it also underlines strength in the jobs market across the economy.

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Threats to international growth and problems in the tech sector – where companies have announced significant lay-offs – may have an impact on income tax as the year goes on. But it is not evident yet.

And to complete the happy picture for Minister for Finance Michael McGrath, VAT is running 16 per cent ahead for the first four months due to the bounce in consumer spending. Even adjusting for a technical factor the increase is still a hefty 13 per cent. Here there will be reason to watch the impact of higher interest rates on spending. But, as with other tax headings, it is a case of so far, so good.

All attention will now be on the returns for the next key couple of months, ahead of the publication of the Summer Economic Statement. All the signs are that, as was the case last year, there will be cash to spare – and lots of it.