Government tax revenues year-to-date are running 27% ahead of a year ago, thanks to strong growth in income tax, VAT, corporation tax and wealth taxes.
Ministers pointed out that the annual comparison is flattered by the stringent trading lockdown in the opening months of 2021.
Income tax receipts to end-May 2022 from the start of the year amounted to €11.9 billion, up 17% on an annual basis.
VAT receipts were €9.0 billion, up 29% year-on-year for the five-month period. 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. VAT receipts were 23% cent higher than in the same period in 2019 (pre-pandemic).
At €2.1 billion to end-May, excise duty receipts were also up 2% on an annual basis.
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Corporation tax receipts were €2.3 billion higher in the period at €5.2 billion to end-May.
Total gross voted expenditure to end-May amounted to €31.8 billion, 3.5% below the same period in 2021, as a result of the unwinding of Covid-19 supports.
As a result, an Exchequer surplus of €1.4 billion was recorded to end-May compared with a €6 billion deficit a year ago.
On a 12-month rolling basis – which ministers say is a better measure of underlying trends – the Exchequer accounts were in balance in May.
Peter Vale, tax partner in Grant Thornton, commented: “May is a ‘VAT month’, with strong receipts reflecting robust consumer spending, including online purchases. While inflation plays a part in the strong returns, it's also clear that so far the crisis in the Ukraine, or the risk of substantial interest rate hikes, has not had a significant impact on consumer confidence.
“May is normally the first key month for corporation tax returns. However returns this year have already been exceptional. With more pessimistic economic forecasts for the rest of 2022, we may see a dip in corporate tax revenues next month, as lower profit projections will impact on preliminary tax payments in June and later months of the year.
"Overall, while May was yet another good month for the Exchequer, there will be nervousness regarding the impact of a global slowdown on tax receipts for the remainder of the year, in particular corporation tax returns."
Tom Woods, Head of Tax at KPMG, said that the “extraordinary performance” of corporation tax, income tax and VAT is not surprising given the strength of the ICT sector and the buoyancy of the labour market.
“However, we need to be conscious of the dual nature of the Irish economy whereby the domestic economy is likely to feel the full impact of inflationary pressures in the coming months,” Woods added.
Finance minister Paschal Donohoe (pictured) said underlying tax trends are a good signal of the continued momentum in the domestic economy.
"However, given global inflationary pressures, monetary policy will become less accommodative going forward,” he added.
“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 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 stated: “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.
"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.
“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.”
