Economy emerging from crisis rapidly as tax revenues soar

Three of the big four tax sources helped deliver €39.5bn this year, leaving State finances in good shape ahead of Budget 2022
Economy emerging from crisis rapidly as tax revenues soar

Finance Minister Paschal Donohoe said Budget 2022 will set out to rein in the deficit and invest in capital projects, as the CSO and Department of Finance released numbers suggesting the economy is making a remarkable recovery. Picture: Gareth Chaney/Collins

Ireland is emerging from the Covid-19 crisis faster than anywhere else in Europe, the latest economic indicators show. 

The Government took in €5.2bn more in tax revenues in the first eight months this year compared with the same Covid-ridden period in 2020, according to the exchequer returns from the Department of Finance. And new figures from the CSO showed the Irish economy expanded at the fastest rate in Europe in the spring quarter. 

In August alone, large increases in three of the big four tax sources — income tax, corporation tax, and excise duties — led to the exchequer collecting almost €870m more than anticipated in the month.  

Revenue 15% up on last year

The figures suggest that the Government finances are in a healthy state ahead of October's budget. 

At €39.5bn, the exchequer has collected 15% more in tax revenues so far this year compared with the same period in 2020.

Gross expenditure to end-August reached €53.4bn, but economists say that there are few constraints as the Government prepares its detailed work on Budget 2022 in October. 

Finance Minister Paschal Donohoe said the budget will set the groundwork to rein in the deficit and also for investments in capital projects.  

GDP increased 6.3% in the three months to the end of June compared with the previous quarter, reflecting the continuing strong growth from the foreign-owned corporate giants based here, as well as the domestic bounce back from the Covid restrictions, CSO statisticians said. 

The figures will increase the confidence of the Government ahead of October’s budget that the economy is on course for a very strong rebound from the pandemic.

'Dramatic' increase in activity

Austin Hughes, chief economist at KBC Bank Ireland said the figures showed “a dramatic” and broad-based increase in activity. Consumption remains below pre-pandemic levels but “the overall story is the amazing multinational machine”, Mr Hughes said. He predicts GDP will surge 15% this year. 

Dermot O'Leary, chief economist at Goodbody, said the domestic economy was "booming" as the economy started to reopen, while the multinationals "continued to excel". 

And the recovery was "now being felt more widely across the economy", said Ibec economist Hazel Ahern-Flynn.

Economy grew by 16% in first half

The economy grew by over 16% in the first six months this year from the first half of 2020, and significantly, activity was 21% higher than at the first half of 2019. The figures again underlined the significant role multinationals play in the Irish economy.

A study by the CSO investigated the working parts of the two high-growth areas dominated by the multinationals.

In pharmaceuticals, the components include manufacturing, biologics, bulk-dose manufacturing, research and development, and global business operations, the CSO said.

Activity in information and communications in Ireland is made up of software licensing, web-based services, product research and development, software development and distribution, as well as product localisation.

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