Exchequer surplus falls to €1.2 billion in 2023 from €5 billion in 2022

January 6, 2024

The Exchequer recorded a surplus of €1.2 billion in 2023, according to figures released by the Department of Finance.

This compares with a surplus of €5 billion in 2022, with the decline driven by factors including increased public expenditure and the transfer of €4 billion to the National Reserve Fund (NRF) in February last year.

An underlying deficit of around €6.5 billion was recorded for 2023 when “one-off” factors are excluded such as transfers to the NRF, proceeds from the disposal of bank equity and estimated “excess” corporation tax receipts.

The latest Exchequer Returns show that corporation tax receipts amounted to €1.8 billion in December, up by almost 20% compared to December 2022.

Annual corporate tax receipts amounted to €23.8 billion, which is €1.2 billion, or 5.3%, up on 2022.

Corporation tax has been highly volatile in recent months, coming in lower than forecast in August, September and October before seeing a strong recovery in November.

“Although it remains the State’s second largest source of revenue again this year, there has been a significant moderation in growth in this revenue stream compared to recent years,” the Department of Finance said in relation to corporation tax.

Overall, tax receipts of €88.1 billion were collected in 2023, which was an increase of €5 billion or 6% on an annual basis, driven by growth in income tax, VAT and corporation tax.

Tax receipts of €6.1 billion were collected in December, up 8.2% on the same period in 2022.

Income tax receipts of €2.6 billion were recorded in December, 4.8% ahead of December 2022.

Overall in 2023, income tax receipts amounted to €32.9 billion, which was €2.2 billion ahead of 2022, reflecting the strong labour market.

VAT receipts totalled €20.3 billion in 2023, €1.7 billion or 9.4% higher than the previous year.

Stamp Duty receipts of €1.8 billion in the year were slightly down, by €64m, when compared with 2022.

Capital Gains Tax receipts for the year stood at €1.5 billion, down by €0.2 billion on 2022.

Capital Acquisitions Tax collected in 2023 stood at €634m up slightly by €28m, on an annual basis.

Customs receipts of €582 million were down by €54m on 2022.

Capital receipts for the year amounted to €1.9 billion, down by €3.4 billion on 2022.

The Department of Finance said the decrease was primarily driven by a reduction in the repayment of the loan to the Social Insurance Fund in 2023 which is net neutral overall and also lower proceeds from the sale of bank shares.

Total expenditure for the year amounted to €107.3 billion.

Of this, gross voted expenditure stood at €94.7 billion, which was €5.9 billion or 6.7% ahead of 2022.

Non-voted expenditure accounted for €12.6 billion, €0.3 billion behind the same period in 2022.

Minister for Finance Michael McGrath said tax receipts in 2023 came in largely as anticipated.

“It must be acknowledged, however, that the budgetary surplus includes windfall corporation tax receipts which, if excluded, would result in an underlying deficit,” Mr McGrath said.

“In this regard, it is important to stress the more modest growth rate in this revenue stream over the past year as well as the inherent volatility in these receipts.”

“Indications are that pandemic-era surge in exports in a small number of sectors – which drive corporate profitability in Ireland – are now unwinding; this would mean more modest growth in corporation tax receipts in the coming years,” he added.

Minister for Public Expenditure, NDP Delivery and Reform, Paschal Donohoe said the figures reflected the Government’s commitment to sustainable investment in public services.

“This substantial spending supports ongoing enhancements in public services, social assistance, and infrastructure,” Mr Donohoe said.

“These supports provide benefits for our growing and changing population including childcare, healthcare, education, and increased social assistance payments,” he added.

‘Strong performance’

Peter Vale, Tax Partner at Grant Thornton, said the December figures rounded off another strong year for the Exchequer on the tax receipts front.

Despite a moderation in growth, corporation tax remained a star performer, he pointed out, with further growth on what was a ‘stellar’ 2002.

“The strong November corporation tax figures will fuel hope that these numbers can be maintained in 2024. If so, the projected large Budget surpluses in the coming years look realistic,” he said.

“Overall, tax receipts finished the year 6% ahead of 2022. Given the relatively weak global economic backdrop, this is a very strong performance,” Mr Vale added.

Tom Woods, Head of Tax at KPMG, pointed out that 2023 marked the third consecutive year of record-breaking tax yields.

“An Exchequer surplus of €1.2 billion is a very strong end to a year in which corporation tax receipts showed signs of volatility in May, August, September, and October” he said.

“Income Tax and VAT receipts for the year consistently outperformed corresponding monthly yields for 2022 with inflation likely to be a contributing factor.”

A trend to more modest growth in tax receipts in 2023 was expected, Mr Woods said, and is forecasted to extend into 2024.

The estimated 4.5% growth in tax receipts is greater than expected inflation for 2024, he pointed out, underlining the resilience of the economy.

Ian Talbot, Chief Executive of Chambers Ireland, said the Exchequer performance was all the more impressive in light of global challenges, which would continue into this year.

“Ongoing wars, new threats to global trade and several important elections globally will continue to overhang the global economy and trade” he said.

“As a small, open, trading economy Ireland cannot isolate itself from potential impacts of these and other events and, at the same time, we must also plan for future growth in our economy and population.”

Article Source – Exchequer surplus falls to €1.2 billion in 2023 from €5 billion in 2022 – RTE

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