State €1bn in the red for year to date

Exchequer returns shows gap is narrowing on deficit of €7.6bn posted in 2021

The State ended last month more than €1 billion in the red for the year so far, official figures show.

According to exchequer returns published on Wednesday, the Government spent €31 billion in the four months to the end of April, while revenues, including taxes, totalled €29.9 billion. This left the State with a €1.1 billion deficit for the year to date, an improvement of €6.5 billion on the €7.6 billion shortfall it recorded at the same point in 2021.

Workers and businesses paid a total of €21.1 billion in taxes in the period, €5 billion or 31 per cent more than in the first four months of 2021, when pandemic Covid curbs closed many enterprises.

Non-tax income, which can include dividends from State companies and other payments, came to €3.6 billion.

Tax

Cash earned by Government departments and agencies for services they provide to the public – known as appropriations in aid – totalled €5.1 billion, bringing all non-tax earnings to €8.7 billion.

Income tax collected from workers increased by €1.5 billion to €9.5 billion in the first four months of the year. April accounted for €2.7 billion of the total, up 28 per cent.

Companies paid €2.3 billion corporation tax on their profits up to the end of April, €1.7 billion more than during the same period in 2021. The Department of Finance explained that the increase was partly down to the timing of corporate tax payments.

VAT surged €1.4 billion to €6 billion over the four-month period. The Department said Covid restrictions and a temporary cut in the tax which is levied on goods and services, hit the amount collected up to the end of April last year.

Excise duty, charged on fuel, alcohol and tobacco, edged up €48 million to €1.7 billion in the first four months.

Minister for Finance Paschal Donohoe warned that the war in Ukraine would hit the economy and public finances.

“We know that there are difficult times ahead but we also know that we face them from a strong position,” he said. The Minister argued that the exchequer figures showed the economy’s strength even though last year’s Covid lockdowns distorted comparisons.

Minister for Public Expenditure and Reform Michael McGrath said 27,000 Ukrainian refugees had arrived in the Republic. He confirmed that the Government was providing welfare, health, education and accommodation where new arrivals needed these services. He predicted that existing Government spending allowances would cover this cost.

“The recently published Stability Programme Update provided for funding of €3 billion to address the crisis in 2023,” he added.

Corporate taxes

Peter Vale, tax partner at Grant Thornton Ireland, cautioned that any global downturn would disproportionately hit corporate taxes. He pointed out that high profits earned here by multinationals heavily influence the amount of this tax that the State collects. While he acknowledged that timing played a role, he said the exceptionally high corporate tax return for the period was partly due to high profits earned by technology companies. He also highlighted that the capital gains tax take for the first four months increased by €218 million to €314 million.

“An increase in both asset prices and deal activity is driving this growth,” Mr Vale said.

The Department maintained that the increase was due to a “technical factor” that resulted in the Government recording an artificially low figure for the same period in 2021.

Tom Woods, partner and head of tax and legal at KPMG, described the consistently strong corporate tax returns as “a rare constant” against a backdrop of uncertainty created by war and soaring inflation, as well as global tax reform.

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