Tax take in January already up on bumper 2022 numbers

Flow of money into the public finances will keep pressure on ministers to maintain cost of living supports

Finance Minister Michael McGrath: Damien Storan

February 02 2023 04:30 PM

The public finances are off to a stronger start in 2023 than even last year’s bumper tax take had produced.

In January the State’s income was boosted by an extra €800m of tax paid compared to the same month last year as well as €300m from the sale of AIB shares.

The Exchequer surplus of €2.8bn in January compares to a surplus of €2.2bn in the same month last year. January is not a big month for corporation tax so the figures reflect income tax and Vat, traditionally the two biggest sources of income for the State, although the better Vat number is partly down to a technical factor, officials said, but even accounting for that the tally was up €400m.

Strong income tax and Vat numbers point to the resilience of the so called real economy including spending over Christmas and suggest the Ireland has skirted a threatened recession.

On a 12-month rolling basis, which the Department of Finance headed by new Minister Michael McGrath, says is a more appropriate measure of the trend, the Exchequer recorded a surplus of €5.6bn.

On the spending side, total expenditure for January was €6.8bn, less than in January last year although the so called ‘voted expenditure’ which is a result of budget decisions, was up.

The strong flow of money into the public finances is likely to mean continued pressure on ministers to maintain cost of living supports as the public continues to grapple with huge energy bills, higher food prices and rising borrowing costs as well as channelling funding to address the ongoing shortage of housing.

The January data comes after last week’s estimates from the European statistics agency, Eurostat, which showed Ireland had a larger budget surplus than any other EU countries in the third quarter of 2022.

In seasonally adjusted terms, Ireland’s budget surplus, at 3.1pc of gross domestic product (GDP), was among the highest in the 27-member EU and the 20-country euro area.

Figures published by Eurostat, the EU’s statistics agency, show there were only six countries, including Ireland, that had budgets in surplus, in seasonally adjusted terms, in the third quarter.

The EU average was a deficit of 3.2pc, while in the 20-member euro area, it was a deficit of 3.3pc.

In seasonally unadjusted terms - not accounting for things like extra Vat returns due to higher holiday spending or months where income or corporation taxes fell due - Ireland had the fifth-highest surplus at 2pc of GDP.