Highest-ever tax yield puts Ireland in exchequer surplus for 2022
Commenting on today’s Exchequer Tax Receipts for December, Tom Woods, Head of Tax at KPMG, says, “Tax receipts of €83 billion for the year are the highest ever tax yield, exceeding 2021’s record-breaking yield by 21 percent. Corporation tax, income tax, and VAT produced outstanding yields despite the uncertainty facing households and businesses large and small throughout the year. The exchequer surplus of €5 billion is no mean feat considering the cost-of-living measures introduced in 2022.
Given the impact of economic uncertainty on business transactions, growth in capital tax receipts for 2022 is holding firm. Having said that, CGT receipts of €1.7 billion are still substantially less than the €3 billion collected in 2006 when a 20 percent CGT rate was in operation compared to the current higher rate of 33 percent. Consideration should be given to whether a reduction in the CGT rate would encourage greater capital tax receipts.
Notwithstanding Ireland’s record-breaking tax take in 2022, it’s more important than ever that Ireland remains competitive for FDI purposes and supports indigenous businesses given the uncertain global economic outlook for 2023.
€5 billion surplus reflects strong growth in tax revenues
An Exchequer surplus of €5 billion was recorded in 2022. This compares to a deficit of €7.4 billion recorded in 2021, an improvement of €12.4 billion. The increase reflects strong growth in tax revenues and a decline in Covid-19 related expenditure.
The Department of Finance estimates that, if windfall corporation tax receipts are excluded, this amounts to an underlying deficit of approximately €5¼ billion. Tax revenue in 2022 stood at €83.1 billion, which was €14.7 billion ahead of the same period last year. The increase is driven by strong growth in income tax, VAT, and in particular, corporation tax. Overall, in 2022, income tax receipts amounted to €30.7 billion, which is €4.1 billion ahead of the same period in 2021, reflecting the continued strength of the labour market.
Annual corporation tax receipts amounted to €22.6 billion, which is €7.3 billion ahead of the same period last year. It has comfortably overtaken VAT to become the State’s second-largest source of revenue this year. However, some of these receipts are expected to be once-off in nature.
Cumulative VAT receipts stand at €18.6 billion, an increase of €3.2 billion on the same period in 2021, reflecting the recovery in consumption. Stamp Duty receipts of €1.8 billion were collected in 2022, up by €0.3 billion on 2021. Capital gains tax receipts for the year stood at €1.7 billion, up by €0.1 billion compared to 2021. Capital acquisitions tax receipts of €605 million in 2022 were ahead slightly, by €24 million, on the same period last year.
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