There was more good news in the last set of Exchequer figures prior to next week’s Budget 2022. VAT figures remain robust, with spending remaining firmly ahead of pre-COVID levels. Strong earnings across most sectors of the economy have translated into higher spending and resultant buoyant VAT receipts, landing over 8% ahead of the same period pre-COVID. With the easing of all restrictions later in the month, VAT receipts look set to remain strong for the foreseeable future.
While September saw income tax fall slightly behind forecast, the figures remain strong and up 15% on the same period pre-COVID. Again, with unemployment continuing to fall, it’s difficult to see anything other than further increases in income tax receipts in the coming months.
Corporate tax figures again impressed, with the figures year-to-date ahead of what was a very strong 2020. It’s clear that strong results from a number of larger companies, mainly in the technology sector, are driving corporate tax receipts. If the position is replicated in the key month of November, there will be a large corporate tax surplus by year-end.
The impact of expected global tax reforms on future corporate tax receipts remains uncertain, with further detail from the OECD expected shortly. It’s positive that Ireland continues to see strong foreign direct investment, despite the uncertainty regarding our tax rate. While the Department of Finance has warned that future corporate tax receipts could fall by over €2bn per annum, it’s incredibly difficult to quantify the impact. Indeed, once significant intellectual property tax allowances are fully utilised in the coming years, many existing large companies may see an increase in corporate tax liabilities.
Overall, the positive September figures point to a year-end figure of close to €10bn ahead of 2020 receipts, which would be a remarkable achievement.
Despite the strong figures, it would be a big surprise if we saw significant tax cuts next week in Budget 2022. The indexation of personal tax bands and credits has been well flagged, which will benefit all individual taxpayers. Capital Gains Tax changes are also possible, with some hope for a reduction in the 33% rate, which is one of the highest in the EU.
In summary, a very strong set of numbers today, but not likely to precipitate any tax give-aways next week.