Huge cash surplus of 6.3 billion euros gives the government more than expected for the budget

Ministers Paschal Donohoe and Michael McGrath are walking out with dramatically more money than they anticipated in their budget announcement this month.

The latest Treasury figures up to the end of August show that the government is already running a large surplus of €6.3 billion.

This represents an improvement of €13 billion from this point last year and gives ministers significant resources to deal with the cost of living crisis.

Consistently strong corporate, income and VAT receipts year to date have left public finances in rude health compared to the deep pandemic deficits of the last two years.

But the winding down of Covid-19 support and the reopening of the economy this year has resulted in significantly lower spending and a surge in business activity, filling government coffers.

By the end of August, tax revenue had increased by 26.3 percent year-on-year to 49.8 billion euros.

In the past month alone, 6.4 billion euros in taxes were collected – almost a third more than in August 2021 – mainly driven by new record receipts from corporate taxes.

Adding in non-tax revenue streams, total Treasury receipts now stand at €66.1 billion for the year against total expenditure of €59.8 billion.

Some of the strong tax receipts can be attributed to what is known as the base effect, with comparisons to last year’s lockdown economy flattering this year’s receipts.

VAT, for example, has soared 24 percent this year, largely due to weak numbers in 2021.

But income taxes, which are more stubborn, have also rebounded sharply, while corporate taxes are at all-time highs.

Income tax revenue is €19.2 billion, up 16 percent from the same period in 2021. Corporate taxes are €11.8 billion, or about two-thirds higher than last year.

While the corporate tax windfall is welcome, it has raised concerns that the state is over-reliant on the revenues of a small handful of large multinationals.

Nonetheless, the robust result in tax revenue just ahead of such an important budget will certainly put pressure on Mr. Donohoe and Mr. McGrath to open the taps and a bigger package than the 6.7 billion a few months ago.

With regularly rising energy prices driving up eating in both homes and businesses, many are turning to the state for help. Huge cash surplus of 6.3 billion euros gives the government more than expected for the budget

Fry Electronics Team

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