The latest exchequer figures show that tax trends remains broadly strong. Income tax continues to run close to 9 per cent ahead of last year’s levels, reflecting the strong performance of the jobs market. The latest Central Statistics Office figures have revised up the unemployment rate slightly, but it remains just above 4 per cent and close to historic lows.
July is not a big month for corporation tax, but receipts here so far this year are still more than 20 per cent up on 2022, continuing the strong trend of recent years. Revenues from VAT, the other big tax heading, were up just 5 per cent in July, a smaller rate of increase than previous months. Perhaps the weather had an impact here, particularly in tourist locations. For the year so far, VAT receipts remain well ahead of last year.
With signs that international economic growth is slowing creating some uncertainties, Irish tax trends bear close watching over the balance of this year. That said, while the rate of increase in key areas could ease – for example due to the impact of slower profit growth on corporation tax – the underlying trends look solid, for now at least. A significant budget surplus of tax over spending remains in prospect. The question is, come budget time, will we again be looking at an overshoot of the estimate for the budget surplus this year and next, or will a slowdown in economic growth be having an impact.
It is correct, indeed essential, not to plan to build additional day-to-day spending commitments on top of what may be transient revenues. Budget ministers Michael McGrath and Paschal Donohoe have a fight on their hands here as other ministers eye up the opportunities, ahead of a general election which may well take place next year.
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Equally, it is important to use the opportunity which the surpluses present to tackle some of the key challenges facing the economy, notably the huge infrastructural deficits and the need to invest in clean energy. Ireland has a chance to plan and fund a multi-year investment programme. As ever, proper project planning and execution remains the challenge.
