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Strong momentum in tax receipts continues into the start of this year; €6bn in spending underpins public services and economic recovery – Ministers Donohoe & McGrath

  • Today’s Exchequer figures show that tax revenues in January were €6.7 billion, 24 per cent higher than last year and 13 per cent higher than January 2020;
  • January is a very important month for tax receipts (it is generally the largest month of the year for VAT receipts as it covers the Christmas trading period);
  • VAT receipts were very strong at €3.1 billion, 32 per cent higher than January 2021 although the annual comparison is distorted due to the introduction of public health restrictions in late-2020;
  • VAT receipts were up 15 per cent compared to the same period in 2020;
  • Income tax receipts remain robust at €2.6 billion in January, up 13 per cent on an annual basis and 18 per cent relative to the pre-pandemic position in January 2020;
  • Total gross voted expenditure in January amounted to almost €6.0 billion, €0.3 billion or 5 per cent below the same period in 2021 but 6 per cent ahead of January 2020;
  • An Exchequer surplus of €2.2 billion was recorded in January. However, this figure is inflated by VAT revenues in January, which will not be repeated in February. The 12-month rolling Exchequer deficit – a better measure of underlying trends - stood at €6.4 billion in January.

January is a very important month for tax receipts and the largest month for VAT receipts as it encompasses the busy Christmas trading period. Overall, tax receipts were €6.7 billion in January, up 24 per cent on an annual basis and 13 per cent higher than the pre-pandemic position in January 2020.

Reflecting the recovery in consumer spending, VAT receipts in January were €3.1 billion, up almost 32 per cent on the same period in 2021. However, the year-on-year comparison is inflated by a number of factors including the introduction of public health restrictions in November and late-December 2020 and the reduction in the standard rate of VAT over the same period. As a result, the pre-pandemic January 2020 position is a more useful comparison with VAT receipts up by 15 per cent over this period.

At €2.6 billion, income tax receipts remain robust up 13 per cent on an annual basis, and reflect the ongoing recovery in employment, alongside the strength of wages in sectors less affected by the pandemic. January is not a significant month for corporation tax and receipts of €81 million were up by €24 million on the January 2021 outturn. Excise duty was the only main tax head to decline in January 2022 falling by almost 2 per cent.

Total gross voted expenditure in January amounted to almost €6 billion, almost €0.3 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 pensions being paid for a fifth Friday in January 2021 and also due to a decline in expenditure on the Pandemic Unemployment Payment.

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 this year. While annual comparisons flatter the performance of tax receipts, the underlying trends are a positive sign of the strength of the domestic economic recovery. VAT receipts reflect the significant rebound in consumer spending and the ongoing recovery in the labour market continues to drive the strong income tax performance.

Since the pandemic began, the Government’s approach has been to support the economy through a counter-cyclical budgetary policy to mitigate the effects of the Covid-19 outbreak. This has led to a significant increase in public debt which is now approaching a quarter of a trillion euros, the equivalent of €47,500 per capita, a figure that is amongst the highest in the developed world.

The fiscal cost of the pandemic has been enormous but this is a cost that has been worth bearing. The Government’s approach has worked well, and Government has established the foundations for the strong domestic recovery seen to-date. With private demand now accelerating rapidly and supply bottlenecks already evident in some sectors, it is essential to slow the growth rate of public demand in order to avoid overheating the economy; counter-cyclical budgetary policy works in both directions”.

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

“This January saw public expenditure of almost €6 billion, this reflects the continued support of people, public services and the economy throughout the challenges of the pandemic. Social protection continues to make a strong contribution through Covid supports including the Employment Wage Subsidy Scheme at a cost of €279 million and the Covid Illness Benefit at almost €75 million in January 2022.

This Government has taken a prudent approach in Budget 2022, with €3.1 billion in additional funding for measures to address the challenges of Covid allocated to departments’ estimates for the year and a further €3.9 billion held in reserve. This has ensured that the necessary resources are available to implement a responsive approach to the challenges of Covid in January and throughout 2022 as required. This support is critical to the safe reopening of our economy and society as we emerge from the pandemic.

Budget 2022 provided for significant investment in our public services with €80.1 billion allocated in core spending. As the year continues, we will see this expenditure lead to sustainable improvements in public services, while supporting a reduction in the deficit and placing our public finances on a sustainable path once again. Our capital budget of €12 billion in 2022 will see the continued rollout of vital infrastructure projects under the National Development Plan 2021-2030.”

Fiscal Monitor January 2022

ENDS

Notes to editors:

  • The standard rate of VAT was reduced from 23 per cent to 21 per cent during September 2020 to end-February 2021.