From Department of Finance; Department of Public Expenditure, NDP Delivery and Reform
Published on
Last updated on
An Exchequer surplus of €1.4 billion was recorded at end-May 2022. This compares with a deficit of €6.0 billion in the same period last year. The €7.4 billion improvement in the Exchequer balance was primarily driven by strong growth in tax revenue, with tax receipts of €30.1 billion to end-May, up €6.4 billion (over almost 27 per cent) on an annual basis. The annual increase is, however, flattered by the stringent level-5 restrictions that were in place in the opening months of last year as well as a number of other technical factors. On a 12-month rolling basis, a better indicator of the trend, the Exchequer accounts were essentially in balance (surplus of c. €32 million).
At €11.9 billion to end-May, income tax receipts remain robust, up 17 per cent compared to last year, and reflect the strength of the labour market as well as continued increases in wages.
Reflecting the recovery in consumer spending, VAT receipts to end-May amounted to €9.0 billion, up almost 29 per cent on the same period last year. However, the annual comparison is impacted by a number of factors including the public health restrictions that were in place last year. In addition, VAT receipts are boosted by the impact of tax warehousing last year and the standard rate of VAT was also lower in the opening months of 2021. That said, VAT receipts were 23 per cent higher than in the same period in 2019 (that is, pre-pandemic). At €2.1 billion to end-May, excise duty receipts were also up 2 per cent on an annual basis.
Corporation tax receipts amounted to €5.2 billion to end-May, up by €2.3 billion relative to last year although this reflects, in part, a timing issue.
Total gross voted expenditure to end-May amounted to €31.8 billion, €1.2 billion or 3.5 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-19 restrictions in early 2021 and the resulting increased expenditure on supports for people and businesses.
The Department of Health expenditure was at almost €9 billion to end-May, reflecting the prevalence of COVID-19 during the earlier part of the year.
Commenting on the figures, the Minister for Finance Paschal Donohoe said:
“Today’s figures show that tax receipts remain robust with strong growth evident in the vast majority of tax heads. While the annual comparisons are distorted due to a number of factors, in particular the public health restrictions that were in place last year, the underlying trends are a good signal of the continued momentum in the domestic economy.
"However, given global inflationary pressures, monetary policy may become less accommodative going forward. Indeed, we can no longer assume that the highly favourable interest rate environment that has prevailed recently will continue. What is clear is that the higher our level of public debt, the more severe the implications of any rise in borrowing costs will be. We also know that our prospects for affordable borrowing costs are improved with careful management of the public finances.
"It is crucial that we use the strong momentum in the public finances to rebuild and reinforce our fiscal buffers so that, in this ever more uncertain world, we retain our ability to swiftly and effectively respond to future shocks. There are many challenges to meet, but there are also opportunities to seize, if we make the right decisions now."
The Minister for Public Expenditure and Reform Michael McGrath said:
“Total gross voted expenditure to end-May 2022 amounted to almost €32 billion, with nearly €30 billion of this related to current expenditure. This reflects the government’s continued commitment to the delivery of public services and investment in infrastructure.
"The fiscal outturn shows a strong economic recovery post pandemic, however risks remain. Pressures are continuing in relation to the provision of COVID-related supports in certain sectors, pressures are emerging related to the humanitarian response to the war in Ukraine and the recent increases in the cost of living. While Government cannot fully insulate the economy and society against these external factors, steps have been taken to mitigate their impact. A package of measures was introduced to support citizens across a range of sectors with cost of living pressures and social and economic supports are being provided for Ukrainian refugees arriving in Ireland. Over the coming weeks I, with my colleague the Minister for Finance, will consider how to manage the dual challenge of supporting our economy and investing in our public services whilst ensuring the public finances remain on a sustainable trajectory.”
The standard rate of VAT was reduced from 23 per cent to 21 per cent during September 2020 to end-February 2021.