Income tax figures for 2022 were robust. Wage inflation trumped what seems to have been relatively modest job losses in the technology sector, leaving income tax receipts buoyant and over 15% ahead of 2021.
Perhaps surprisingly, VAT receipts also remain strong, with full year figures almost 21% ahead of 2021. It’s worth noting however that it will be next month before we see the returns for the crucial Christmas period.
The higher VAT receipts are driven by a combination of factors, including price inflation, higher disposable incomes and a slight dip in savings levels as the year progressed. 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.
Once again bumper corporation tax receipts are the highlight of the Exchequer figures, despite a small drop in December, with full year returns €7.3bn ahead of 2021. While there will be concern as to our dependence on a very small number of foreign multinational companies for an increasingly significant portion of our overall tax revenues, these figures represent a remarkable turnout for the Exchequer.
Underpinning the strong corporate tax returns are very positive results by large MNCs based here, in both the pharma and technology sectors in particular.
Looking ahead, an increase in our corporate tax rate to 15% (from 2024), together with the expiry of valuable intellectual property allowances, could see our corporate tax take grow further. It’s certainly not a given that we will see a drop in corporate tax revenues. However, corporate tax revenues will be hugely influenced by the global economic environment and the results of certain large MNCs based here, thus uncertainty remains high.
Overall, 2022 was a remarkable year for the Irish Exchequer on the tax receipts front, with record receipts of €83.1bn collected. While the global economic outlook remains uncertain, at this point there should be cautious optimism that we can see these figures maintained in 2023.
