Tax receipts for the first month of 2023 were very positive, finishing 12% ahead of January 2022, with all key tax heads performing well.
Despite some high profile job losses in the technology sector in particular, a generally buoyant labour market and wage inflation have seen income tax receipts remain strong, finishing the month over 9% ahead of January 2022.
While there is generally a lag between job loss announcements and any impact on income tax receipts, there will be relief in the Department that the figures are more than holding up, which augurs well for the rest of the year.
Perhaps more remarkable is how VAT receipts held up over the key Christmas period, finishing the period 12% ahead of January 2022 on an adjusted basis.
It is quite remarkable that despite mortgage interest rate hikes and higher energy bills, discretionary consumer spending remained strong in the period. The buoyant spending is likely due to a combination of historically strong savings and an increase in disposable income.
Looking ahead, it’s inevitable that further interest rate increases will put more pressure on many consumers. However the resilience to date suggests that even in an environment of rising costs, spending will hold up.
While January is a quiet month for corporation tax receipts, the Department has previously dampened hopes of ongoing bumper corporation tax receipts. With a sizeable portion of our corporation tax receipts dependant on a handful of large MNCs, it is very difficult to predict where corporation tax returns for the year will land. However, with some recent cautious optimism for the prospects of a global economic recovery, it is quite possible that we will see the remarkable 2022 returns at least maintained in 2023. It will be some months before we can assess this.
Looking ahead to 2024, an increase in our corporation tax rate for large companies to 15% may see corporation tax receipts rise further, although we remain very exposed to the global economic environment. Uncertainty remains a key term in relation to corporation tax receipts.
In summary, a very good start to the year for the Exchequer and some positive indicators for the year ahead.
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