Government tax revenues surged by 32% in the first quarter of 2022 compared with a year earlier when much of the economy was in lockdown.

Income tax receipts in the first quarter amounted to €6.8bn, up 16% on an annual basis.

VAT receipts in the three-month period were €5.9bn, up 30%, while corporation tax receipts more than tripled to €1.9bn.

Department of Finance officials aid the huge increase in business taxation in part reflects “a timing issue”.

Government spending in the January to March 2022 period was down marginally on a year earlier.

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There was a large decrease in social welfare outlays, down 35% year-on-year, due to reduced spend under the Pandemic Unemployment Scheme.

Overall, state finances were in surplus to the tune of €156m for the first three months of 2022. This compares with a deficit of €4,2bn for the first quarter of 2021.

Tom Woods, Head of Tax in KPMG, noted the influence of inflation in the strong tax receipts for Quarter 1.

“It has  been a strong first quarter to 2022 in terms of tax receipts and this ties in with high levels of business activity we have been seeing on the ground among our clients,” said Woods. 

“Higher income tax receipts reflect the buoyancy of the Irish labour market. The skills shortage and inflationary pressures are also likely a factor in the hike in income tax receipts.

“VAT is a barometer of consumer spending. However, as VAT applies to the price of goods and services, some of the increase in the VAT take is no doubt derived from rising prices felt by businesses and consumers since the start of this year.”

 On a 12-month rolling basis, which DoF says is a better indicator of the trend, the Exchequer recorded a deficit of €3.0bn.

Finance minister Paschal Donohoe commented: “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.

“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 added.