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Minister for Finance Paschal Donohoe and Minister for Public Expenditure and Reform Michael McGrath today announced the Exchequer returns and expenditure for the first quarter of 2022.
An Exchequer surplus of €0.2 billion was recorded at end-March 2022; this compares with a deficit of €4.2 billion in the same period last year.
The €4.3 billion improvement in the Exchequer balance was driven by strong growth in tax revenue, with tax receipts of €17.2 billion in the first quarter, up €4.2 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 first quarter of last year.
At €6.8 billion in the first quarter, income tax receipts were up 16 per cent on an annual basis, reflecting the strength of the labour market. The level of employment, for instance, is now at its highest ever.
VAT receipts in the first quarter were €5.9 billion. This was an annual increase of 30 per cent and reflects much higher levels of consumer spending relative to the same period last year when contact-intensive activity was at very low levels. In addition, a lower standard rate of VAT (21 per cent) was in place in the first quarter of 2021. That said, VAT receipts in the first quarter of this year were 17 per cent higher than in the first quarter of 2019 (i.e. pre-pandemic).
Corporation tax receipts amounted to €1.9 billion in the first quarter, up by €1.3 billion relative to last year. The annual increase in corporation tax in March reflects, in part, a timing issue, i.e. payments made in March that are usually made in August. This will distort year-on-year comparisons in the coming months.
At €1.2 billion in the first quarter, excise duty receipts were essentially flat on an annual basis. This likely reflects the negative impact of rising energy prices on the volume of excise-related spending alongside policy decisions (the reduction in excise duty) which took effect last month.
Total gross voted expenditure to end-March amounted to €18.9 billion, €0.6 billion or 3 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.
On a 12-month rolling basis — a better indicator of the trend — the Exchequer recorded a deficit of €3.0 billion.
Commenting on the figures, the Minister for Finance, Paschal Donohoe T.D. said:
“Today’s figures show that tax receipts remained strong in the first quarter of the year. While the annual comparisons are distorted due to a number of factors, the underlying trends are a positive sign of the strength of the domestic recovery. The exchequer returns for the first quarter also reflect the resilience of employees and employers, who responded over the last two years to the challenges of public health restrictions.
“While the pandemic is receding, the fall-out from the Russian invasion of Ukraine will have a significant impact on the public finances. Higher prices for energy and other goods will weigh on economic growth in the months ahead, and this will affect tax revenue. The overall costs of providing for the reception of people arriving from Ukraine are likely to be very substantial. These costs will have to be borne – we have an obligation to our fellow Europeans to look after them as they flee for their lives. Higher levels of uncertainty will also be a headwind.
All of these factors will have implications for the public finances. We can meet these challenges, but only if we continue to implement sensible, prudent policies.”
The Minister for Public Expenditure and Reform, Michael McGrath T.D. said:
“The first quarter of 2022 has seen expenditure of €18.9 billion, reflecting the Government’s continued support of public services and the economy as we recover from the pandemic. At the end of March, expenditure in the Department of Social Protection is ahead of profile by over €0.2 billion reflecting the decisions supports to employers and individuals through the Pandemic Unemployment Payment, the Employment Wage Subside Scheme and Covid-19 Enhanced Illness Benefit in response to the surge in the virus late last year.
As we emerge from the pandemic we now face a new challenges, including the impact of the Russian invasion of Ukraine and the humanitarian response. Providing for Ukrainian refugees is a key humanitarian concern which the Government address through a whole of Government approach. However, this will involve significant costs.
At Budget 2022, the Government took a prudent approach and set out a contingency fund of €4 billion to support the economy and public services and allow Government flexibility in responding the challenges related to the pandemic. €1.5 billion of this is now committed with effectively €2.5 billion remaining. This contingency will provide us with some scope to meet the costs of the humanitarian provision in response to the crisis in Ukraine. However, at least some of the remaining balance in the contingency fund will also be required to manage the impact of Covid across the year. The management of these dual challenges will be a key priority for public finances over the coming months.”
ENDS
Notes to editors: