Government will consider extending inflation supports to homes and businesses after State finances recorded a €5 billion surplus for 2022, ministers confirmed on Wednesday.
Exchequer returns for last year show that Government revenues outstripped spending by €5 billion on the back of windfall gains in tax on corporate profits.
Following the news, Minister for Finance Michael McGrath confirmed that the Government would consider extending household energy bill supports and other measures to combat inflation, past their scheduled February end date.
“We made a particular decision that these measures would end at the end of February, that’s the basis of our budget, but we have always said that we would keep that under review,” he said.
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Mr McGrath added that he and Minister for Public Expenditure Paschal Donohoe would discuss the case for extending the aid with their Cabinet colleagues in coming weeks.
The aid includes the €600 electricity bill payments to each home in the State, cash supports to businesses grappling with surging energy costs and VAT and excise reductions, all pledged in Budget 2023.
The Minister cautioned that those four “big ticket” items cost the State an estimated €4.4 billion. However, he conceded that other measures, including income tax and universal social charge cuts and increased childcare and social protection payments, had only begun to apply this week.
A look ahead to 2023
He argued that the Government would need to assess the “entire set of measures in the round” before deciding on whether to extend or taper off aid to homes and businesses beyond the February deadline.
Mr Donohoe maintained that the Cabinet was focused on implementing the budget measures. “We have to evaluate them as we move through the year and then decide on what is the right response,” he said.
Exchequer figures show that the State collected €83.1 billion in taxes from workers and businesses in 2022, €14.7 billion more than in 2021.
Corporation tax, levied on companies’ profits, increased by €7.3 billion to €22.6 billion last year, making it second only to income tax, which contributed €30.73 billion, as a revenue source.
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However, a Government statement acknowledges that some of those receipts are likely to be one-offs.
“If windfall corporation taxes are excluded, this amounts to an underlying deficit of approximately €5.25 billion,” the statement adds.
Mr McGrath acknowledged that the high-tech shake-up that prompted social media giants, including Twitter and Facebook owner Meta, to cut jobs could hit both corporation and income tax collections from this industry.
He stressed that corporation tax was volatile, as just a small number of companies in the pharmaceutical, medical devices and technology industries were responsible for much of what the State collected.
Both he and Mr Donohoe said a surplus in State finances was the only safeguard against this volatility.
Total tax and non-tax revenues amounted to €106.7 billion last year, an increase of €8.5 billion on 2021.
The Government spent €101.7 billion in 2022, €3.9 billion less than during the previous year. Most Covid-19 State supports continued during the early part of 2021.
