Last week, Minister for Finance Paschal Donohoe and Minister for Public Expenditure and Reform Michael McGrath announced that tax revenues to the end of March were €17.2 billion. The Exchequer surplus of €0.2 billion compares with a deficit of €4.2 billion in the same period last year. On a 12-month rolling basis, a better indicator of the trend, the Exchequer deficit stands at €3 billion.
Notably, VAT receipts increased by 30 percent to €5.9 billion, reflecting the significantly higher levels of consumer spending. This is an increase of 17 percent when compared with the first quarter of 2019. Corporation tax receipts increased by €1.3 billion to €1.9 billion. The increase in corporation tax has been explained as a timing issue with payments made in March which would otherwise be expected in August.
Commenting on the figures, Minister Donohoe noted:
“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.”
Minister McGrath added:
“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.”
Read the full release at www.gov.ie.
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