Tax receipts continue to record strong growth; €25.3 billion spending underpins supports to public services and the economy– Ministers Donohoe & McGrath

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Tax receipts continue to record strong growth;  €25.3 billion spending underpins supports to public services and the economy– Ministers Donohoe & McGrath

While this was over 30 per cent higher than last year, the annual comparison is flattered by a number of factors, including a stringent lockdown in the opening months of last year;

An Exchequer deficit of €1.1 billion was recorded at end-April 2022.  This compares with a deficit of €7.6 billion in the same period last year. The €6.5 billion improvement in the Exchequer balance was driven by strong growth in tax revenue, with tax receipts of €21.1 billion to end-April, up €5.0 billion (over 30 per cent) on an annual basis.  The annual increase is, however, distorted by the stringent level-5 restrictions that were in place in the opening months of last year. On a 12-month rolling basis, the Exchequer recorded a deficit of €0.8 billion.

At €9.5 billion to end-April, income tax receipts were up almost 20 per cent on an annual basis, and reflect the strength of the labour market with employment, for instance, now at its highest level ever.

Reflecting the recovery in consumer spending, VAT receipts to end-April amounted to €6.0 billion, up almost 30 per cent on the same period last year.  However, the year-on-year comparison is impacted by a number of factors including the public health restrictions that were in place last year.  In addition, the standard rate of VAT was lower in the opening months of last year.  That said, VAT receipts were 21 per cent higher than in the same period in 2019 (i.e. pre-pandemic). At €1.7 billion to end-April, excise duty receipts were also up 3 per cent on an annual basis.

Corporation tax receipts amounted to €2.3 billion to end-April, up by €1.7 billion relative to last year although this reflects, in part, a timing issue.

Total gross voted expenditure to end-April amounted to €25.3 billion, €1.4 billion or 5 per cent below the same period in 2021. This is driven by a decline in expenditure in the Department of Social Protection due to the impact of Covid restrictions in early 2021 and the resulting increased expenditure on supports for people and businesses.
Health expenditure to end April amounted to €7 billion, up €0.6 billion on the same period in 2021. This reflects increased supports to the sector and the measures implemented as part of the health and social care Covid action response.

Commenting on the figures, the Minister for Finance, Paschal Donohoe T.D. said:

Today’s figures show that the strong momentum in tax receipts has continued into the start of the second quarter.  While the annual comparisons are distorted due to a number of factors, in particular the level 5 restrictions that were in place last year, the underlying trends are a positive sign of the strength of the economic recovery.

It is also important to stress that today’s figures are, of course, backward looking. We expect economic activity and the public finances to be significantly affected by the war in Ukraine.

We have faced many challenges in recent years – Brexit, Covid-19, and now war in Europe. In each one of these, this Government has demonstrated our ability to be agile and responsive. We know that there are difficult times ahead but we also know that we face them from a strong position.”

The Minister for Public Expenditure and Reform, Michael McGrath T.D. said:

Government continues to support the economy and public services with expenditure of over €25 billion in the first four months of the year. This is marginally below profile by €111 million and €1.4 billion lower than the same period in 2021. This lower level of expenditure reflects the gradual unwinding of labour market and business supports as Ireland emerged from the Pandemic.

At the end of April, Social Protection continues to show expenditure ahead of profile by €0.3 billion, reflecting measures to support employees and businesses through the recent Omicron wave of infections. The Department of Health spending is €0.1 billion ahead of profile, largely due to the ongoing response to Covid-19 in the Sector.

Departments continue to respond to the Ukrainian refugee crisis. 27,000 refugees have arrived in Ireland and they are being provided with social welfare, health, education and accommodation supports where needed. While costs are still being determined as number of arrivals increase, it is expected that these can be met from within the overall

Government Expenditure Ceiling in 2022. The recently published Stability Programme Update provided for funding of €3 billion to address the crisis in 2023. These costs will be examined as part of the Summer Economic Statement and Mid-Year Expenditure Report

Article Published: 04/05/2022