March was another strong month for tax receipts, as evidenced in the latest Exchequer figures.
VAT returns were particularly impressive, a stellar 36% ahead of the same month last year. While rising inflation is a factor in the higher VAT receipts, greater consumer spending underpins most of the increase. It’s difficult to see any change in trajectory for the rest of the year.
Income tax receipts were 14% ahead in February and continued that trend in March, finishing 15% ahead of March 2021. With earnings continuing to rise, again it’s difficult to see any change in direction for the remainder of 2022.
March is normally a quiet month on the corporation tax front, but returns for the month of €1.6bn were exceptionally high. This appears to be due to a one–off timing of receipts but is also linked to the profitability of the ICT sector. With further international tax reform currently on hold, it should be business as usual for 2022 at a minimum, with potentially even greater receipts.
Beyond that uncertainty remains, with any increase in our tax rate to 15% now looking like 2024 at the earliest. This should boost future receipts, although other proposed tax reforms will likely see some of that surplus surrendered to market jurisdictions.
With the added bonus of previously “warehoused” tax debts now becoming payable, at this point things are looking very positive for the Irish Exchequer.
Looking ahead, international tax reform will inevitably see some of our competitiveness eroded. Higher than expected tax receipts may provide an opportunity for a reduction in our high marginal income tax rates later this year, which can act as a deterrent to foreign investment.
In summary, another very good month for Exchequer, with receipts for the first three months of the year now 32% ahead of the same period in 2021, and nothing to suggest any deviation from this trend.