Government tax revenues surged to a record â¬ 68.4 billion last year as consumer spending and employment rebounded from the pandemic at a faster-than-expected pace.
Year-end treasury statements, released by the finance ministry, show tax revenue rose nearly 20 percent or â¬ 11 billion last year despite the negative impact of restrictions aimed at tackling the coronavirus at the start of the year.
The latest figures show a public finance deficit of 7.4 billion euros for 2021, an improvement of nearly 5 billion euros compared to 2020.
The larger budget deficit figure, which includes non-cash spending and other government financial transactions, is expected to be just under â¬ 9 billion, less than half of the â¬ 20 billion forecast in early 2021.
“While uncertainty persists around the trajectory of the pandemic, especially in light of the Omicron variant, the very robust performance in 2021 is a positive indicator of the resilience of the economic recovery to 2022,” said the Department.
Yields were supported by a strong recovery in income tax and VAT receipts linked to the economy reopening in May and a further significant increase in corporate tax.
Business tax generated 15.3 billion euros, its highest yield on record and 29% more than the previous year. The department noted that â¬ 1 out of â¬ 4.50 collected in tax is now corporation tax.
Several large multinationals in the tech and pharmaceutical sectors were among the main contributors last year.
OECD tax agreement
The latest returns come as the state signs an OECD-brokered tax deal that will effectively end the popular 12.5 percent rate.
Income tax, the government’s largest tax channel, generated â¬ 26.7 billion for the year, up almost â¬ 4 billion, or 17.4%, from levels of 2020, reflecting what the ministry said was the “ongoing labor market recovery as well as wage growth in sectors isolated from the pandemic.”
VAT revenue for the year amounted to â¬ 15.4 billion, 24% more than the total collected in 2020, reflecting the rebound in consumption as the economic recovery took hold. The sales tax is one of the strongest indicators of the recovery in consumer activity.
On the expenditure side, total gross expenditure for 2021 amounted to 87.5 billion euros, or 2.3 billion euros, or 2.6%, before 2020. The increase included 13.5 billion euros. ‘euros in expenses related to providing Covid supports to the economy.
âThe year-end chessboard returns show the deficit was lower than expected last year. This reflects several factors, including higher corporate tax revenues, an under-spending of voted public spending and the faster than expected recovery of the national economy, especially the labor market, âsaid the Minister of Finance. Paschal Donohoe.
“However, the economic and fiscal outlook has become increasingly uncertain in recent months following the emergence of the highly transmissible omicron variant of the virus,” he said.
Mr Donohoe also warned that “once we get over this wave of the virus and reopen the economy, it is essential to move away from widespread support and move towards more targeted tax measures.”
However, Peter Vale, tax partner at Grant Thornton Ireland, said the higher than expected tax yields should reduce future Treasury borrowing needs while increasing the possibility of tax cuts later this year in the 2023 budget. .