Despite significant global headwinds, the latest Exchequer returns again make for positive reading. However, the position for the remainder of the year and into next year is uncertain.
Income tax figures for October were again strong, reflecting a combination of low unemployment levels and wage inflation. Figures for the month were 12% ahead of 2022 and 15% ahead year to date. So far, any freeze on hiring in the technology sector in particular does not appear to have impacted income tax returns.
While October is a non-VAT month, year to date VAT figures are running 23% ahead of 2021, which is a very strong result. However, VAT figures are likely to come under significant pressure next month and into the early months of 2023 as a combination of higher energy bills and steeper mortgage costs eat into consumers’ spending power.
Corporation tax figures for the year to date have been nothing short of stellar, a staggering €6.6bn ahead of what was a strong 2021. October was another good month, landing €800m ahead of October 2021.
Despite the remarkable corporate tax receipts this year to date, and again this month, the big unknown is what impact the current global economic slowdown will have on future revenues. With mixed news on the corporate earnings front in recent weeks, we may still see a significant drop in corporate tax revenues next month, which would be a real concern.
The Department has already cautioned that the current buoyant corporate tax returns will not be repeated in 2023, although with such volatility in the figures it is very difficult to predict future numbers.
Overall, the October returns represent another excellent set of numbers, leaving the Exchequer €13bn ahead of the same period in 2021. How much of this buffer will be needed over the rest of the year remains to be seen.
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