February tax revenues rise to €4.2bn boosted by buoyant employment levels

Outsized share of February's tax revenues was accounted for by income tax revenues, which rose to more than €2.4bn from the €2.2bn collected in February 2023

The performance of income revenues, which are one of the four big tax sources for the Government, will help reassure that employment levels continue to be buoyant at the early part of the year. Picture: Laura Hutton

The Government collected almost €4.2bn in tax receipts last month, around €270m more than a year earlier, helped by a significant rise in income tax receipts that appears to reflect record levels of jobs in an economy that is still facing high levels of inflation and elevated interest rates.

An outsized share of February’s tax revenues was accounted for by income tax revenues which rose to over €2.4bn from the €2.2bn collected in February last year, the exchequer returns show.

The performance of income revenues, which are one of the four big tax sources for the Government, will help reassure that employment levels continue to be buoyant at the early part of the year. Central Statistics Office figures published last month showed that employment was running at a new record high of 2.7m workers at the end of last year, while unemployment was steady at 4.5%, despite the cost-of- living crisis that has forced many households to tighten their spending.

Money has also been taken out of the economy following the huge increases in mortgage and household interest rates since the European Central Bank started out on its campaign to tame inflation in the summer of 2022.

Two other main tax sources (Vat and corporation tax revenues) are not big performers in February because Vat is not due for collection in the month, while multinationals, which account for the lion’s share of all corporation taxes, pay the bulk of their tax bills much later in the year.

Vat receipts nonetheless rose 13% from a year earlier to €428m, while corporation tax revenues fell almost 12% to €527m.

However, the figures also highlight a further large increase in spending in the month. Net voted current expenditure rose to €11.2bn in the first two months, an increase of €2bn from the same period a year earlier, while net voted capital expenditure increased by €400m to €1.1bn in the period.

The Department of Finance said that the cost of servicing the Government’s debts, at €300m in the first two months of the year, was unchanged from the same period last year.

KMPG head of tax Tom Woods said the increase in income tax revenues was “unsurprising as the labour market now stands at a record 2.71m workers”. The focus turns to the receipts for this month which “will give a better indication of how the economy is shaping up in 2024”, Mr Woods said.

Grant Thornton Ireland tax partner Peter Vale said the figures showed “another solid month for the exchequer on the tax receipts front”.