Tax receipts boom in May defying fears consumers would cut back spending

The bumper receipts will bolster confidence that Finance Minister Paschal Donohoe can easily finance in his October budget any new substantial inflation-fighting package to help vulnerable households struggling with the cost-of-living crisis.

The amount of tax revenue the Government collected boomed in May despite the cost-of-living crisis.

The new exchequer figures will go a long way to allay fears that the Irish economy and in particular household spending will wilt under the sharpest surge in consumer prices for a generation.

Reflecting a buoyant economy, tax revenues from the 'big three' tax sources rose strongly in May.

That helped drive overall tax revenues collected for the month of May to a record €8.9bn – up by a huge 18% from May 2021.

The tax receipts collected over the first five months, at €30bn, were up 27%, and are on course to surpass for the full year the record haul of €68.4bn in tax receipts the State collected in 2021.

The bumper receipts will bolster confidence that Finance Minister Paschal Donohoe can easily finance in his October budget any new substantial inflation-fighting package to help vulnerable households struggling with the cost-of-living crisis.

At €2.9bn in May, Vat receipts climbed 28% from a year earlier defying concerns that consumers would cut back their spending as inflation flared as oil, gas, and food prices surged from the Ukraine war.

Income and corporation tax revenues also continued their starring roles.

At €2.9bn, corporation tax revenues were up 23%, and point to surging profits for the multinationals. For the first five months, corporation tax revenues have brought in €5.2bn.

Last year, corporation tax collected from the likes of the foreign-owned pharma and IT giants helped account for a record haul of €15.3bn, or over 22% of all tax revenues. The State collects most of its corporation tax revenues in the final months of the year.

Income tax receipts brought in €2.4bn in May, an increase of 9% from the same month last year. The income tax haul reflects in part the extraordinary performance of the Irish economy to create new jobs since the ending of the Covid crisis.

The receipts also reflect the increase in wages for the highest paid in the economy over recent years.

However, it will be the Vat tax performance that will grab most attention.

Many economists have projected Irish consumer price inflation will peak in the summer months at around 8% and then ease back.

However, Irish inflation is still projected to remain at relatively elevated levels through 2023, according to the forecasts.

Eurostat said earlier this week that Ireland’s annual inflation in May was running at 8.2%, up from 7.3% in the previous month, and close to the average for the eurozone as a whole.

Inflation is surging at multi-decade-high levels across Europe and many governments have responded by cushioning the prices of electricity and heating for households.

Estonia had the highest inflation in May at just over 20%, and Malta the lowest at 5.6% last month, according to the figures.

The flash estimates by Eurostat are based on a harmonised basket of goods and services that makes inflation easier to compare across the eurozone. Consumer price inflation numbers for Ireland for May are due to be released next week and will likely be close to 8%.