Despite the relatively negative global economic outlook, the latest Exchequer returns demonstrate the ongoing resilience of the Irish economy.
On the income tax front, July returns were 19% ahead of the same month last year, likely fuelled by strong earnings growth. While there is some evidence of a slow down in recruitment, year to date income tax receipts are running almost 17% ahead of 2021.
While the VAT figures for July were 13% of the same month in 2021, this compares to growth of 26% in the first half of the year. This may signal a levelling off of VAT receipts later in the year, ending a long period of post COVID increases. The increase in interest rates announced in July will reduce disposable income for many and may further impact spending and VAT receipts later in the year.
While July is a quiet month for corporation tax receipts, the figures for June were surprisingly good. They provide some comfort that receipts later in the year will hold up, despite the economic uncertainty and some mixed earnings updates from technology giants in particular. While the reliance on a small cohort of large companies remains a concern, the fact remains that despite significant upheaval in the global tax environment, corporate tax receipts have more than held their ground.
Overall, seven months into the year tax receipts are running at €8.3bn ahead of 2021, which is a remarkable position. While there will be a desire to mitigate cost of living increases as part of Budget 2023 next month, it’s likely that prudency will prevail when it comes to any tax cuts.