Booming tax revenues continue to narrow the deficit as public finances approach equilibrium

Strong tax revenue growth and reduced pandemic spending this year have shrunk the budget deficit significantly, new figures from the Treasury Department show.

Increases in corporate, personal income and VAT continued in April, reducing the year-to-date deficit to €1.1 billion, or just €800 million on a rolling 12-month basis.

The deficit at the same time last year was 7.6 billion euros, reflecting heavy government spending on Covid support programs at the time.

Tax revenue in the first four months of the year was 21.1 billion euros, or 31 percent more than in the same period of 2021. Total expenditure, meanwhile, was 31 billion euros, or 2.4 billion euros less than a year earlier.

Much of April’s surge was due to a booming €2.7 billion in income taxes — the bulk of the €3.9 billion collected over the month.

Cumulative income tax at the end of April amounted to 9.5 billion euros – the largest tax item and 1.5 billion euros more than in the same period last year.

That figure was 28 percent higher than April 2021, but the ministry attributed the big increase in part to the end of tax warehousing this year and in part to an extra weekly payday included in the figures.

Corporate taxes have been similarly affected by timing issues, according to the ministry.

So far this year, corporate tax revenues are €2.3 billion, up €1.7 billion from the first four months of 2021. But companies don’t necessarily pay taxes on an ongoing basis, only the final figures in the last quarter of the year will definitely be.

April was a VAT-free month for businesses, so revenue was just €200 million, but total VAT receipts of more than €6 billion year-to-date are up 29 percent from last year’s figure of less than €4.7 billion, indicating a strong recovery indicates post-Covid consumer activity.

Government spending on Covid has fallen significantly this year as the Employment Wage Subsidy Scheme (EWSS) and other supports were phased out.

Just €73.4 million was spent on EWSS in April, the second-lowest since the scheme went into effect in July 2020, which replaced the previous temporary wage subsidy scheme. The subsidy has been phased out for most companies after forgoing nearly €8 billion in direct payments and PRSI in almost two years.