Government revenue from Corporation Tax topped Exchequer receipts from Value Added Tax for the first time in 2022.

End-2022 Exchequer data shows that the tax burden on Ireland’s economy increased by 22% last year to €83.1bn.

Corporation Tax receipts amounted to €22.6bn, nearly 50% higher than a year earlier.

The Department of Finance stated that a significant part of this revenue stream is expected to be once-off in nature and that business profit tax receipts for December were below expectations.

VAT receipts were €18.6bn, up 20% on 2021, reflecting the post-pandemic rebound in consumer spending.

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Grant Thornton tax partner Peter Vale said higher VAT receipts were driven by price inflation, higher disposable incomes and a dip in savings levels.

“Looking ahead it’s likely that higher mortgage interest bills will impact adversely on disposable income and consumer spending, resulting in some pressure on VAT receipts in 2023,” Vale added.

Income Tax receipts increased by 15% year-on-year to €30.7bn.

Overall, the state hauled in €5bn more from taxpayers than it spent in 2022.

This was a €12.4bn swing from the €7.4bn deficit recorded in 2021. The Department of Finance said the change reflects both strong growth in tax revenue and the decline in Covid-related public expenditure.

Full year excise duty receipts declined 7% on 2021 due to cuts in fuel taxes to offset the rising cost of living due to goods and services inflation.

Finance minister Michael McGrath commented: “My department estimates that around half of the Corporation Tax receipts are potentially at risk. That is why government has acted to mitigate this vulnerability by transferring part of this windfall to the National Reserve Fund to rebuild our fiscal resources.

​“It is also important to stress that today’s figures are backward looking. They do not offer a guide as to the challenges that we will have to address going forward.”

However, Peter Vale said the increase in Ireland’s corporate tax rate to 15% from 2024, together with the expiry of valuable intellectual property allowances, could see the corporate tax take grow further.

“It’s certainly not a given that we will see a drop in corporate tax revenues. They will be hugely influenced by the global economic environment and the results of certain large MNCs based here, so uncertainty remains high,” said Vale.

Total gross voted expenditure in 2022 was €88.8bn, up 1.4% year-on-year. Budgeted government spending for 2023 is c.€91bn.

Capital Gains Tax receipts for the year stood at €1.7bn, up by €100m compared to 2021.

Tom Woods, Head of Tax at KPMG, commented that CGT receipts of €1.7bn are still substantially less than the €3bn collected in 2006 when a 20% CGT rate was in operation compared to 33% currently.

"Consideration should be given to whether a reduction in the CGT rate would encourage greater capital tax receipts,” said Woods. “Notwithstanding Ireland’s record-breaking tax take in 2022, it’s more important than ever that Ireland remains competitive for FDI purposes and supports indigenous businesses given the uncertain global economic outlook for 2023.”

Capital Acquisitions Tax receipts of €605m in 2022 were ahead by €24m on 2021.

Stamp Duty receipts of €1.8bn were collected in 2022, up by €300m on 2021. DoF officials said the year-on-year Stamp Duty comparison is skewed by a number of once-off payments, once-off repayments and policy measures, including changes to the settlement of trades in Irish securities in 2021 and changes to the institutions subject to the bank levy in 2022.

Exchequer debt service expenditure in 2022 increased by 2.6% to €3,850m.

Photo: Finance minister Michael McGrath. (Pic: RollingNews.ie)