Surge in March tax revenues to €7.1bn 'will help fund fallout from Ukraine war'

Minister for Finance Paschal Donohoe said: “The overall costs of providing for the reception of people arriving from Ukraine are likely to be very substantial."

Tax revenues surged to €7.1bn in March meaning the public finances are in a healthy shape to fund the costs of a new package in targeted inflation supports and to meet the costs of refugees from the Ukraine war, experts said. 

The Government collected €2.4bn more in tax receipts compared with March 2021, as the three big tax sources – Vat, income and corporation tax – all delivered last month, the latest Exchequer figures show.

Total tax revenues climbed to €7.1bn, or by 52% from the €4.7bn collected a year earlier,  reflecting the lifting of the Covid restrictions that were in place at that time last year. The figures suggest the invasion of Ukraine which started on February 24 is for the time being having little significant effect on Government tax revenues. 

Citing the fallout of the Ukraine war, the Central Bank this week reduced its growth outlook for the Irish economy but said it still projected robust expansion. 

Dermot O'Leary, chief economist at Goodbody, said tax revenues in the first three months had rebounded but that the public finances face a "double whammy" from  the spike in inflation and the costs of refugees fleeing the war. 

The next package of measures to mitigate inflation will have to be targeted on vulnerable households, as the EU Commission outlined last year, Mr O'Leary said. 

Peter Vale, tax partner at Grant Thornton Ireland, said tax receipts were up 32% so far this year, with "nothing to suggest any deviation from this trend".

Vat receipts, which brought in almost €2.5bn in the month, rose by €655m, partly reflecting the temporary cut in the standard rate of Vat a year ago, the Department of Finance said in its commentary. 

Income tax revenues rose 14.5% to €2.1bn over the same period, and corporation tax revenues soared over 580% to almost €1.6bn. The corporation tax receipts reflect some timing issues but nonetheless continue the starring role they have played over recent years. 

“The overall costs of providing for the reception of people arriving from Ukraine are likely to be very substantial. These costs will have to be borne – we have an obligation to our fellow Europeans to look after them as they flee for their lives," said Finance Minister Paschal Donohoe.