Record 2021 tax revenues to show Ireland's resilience in Covid crisis
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Tax revenues that the Government collected in 2021 were the highest in the State’s history, showing the resilience of the economy despite two years of fallout from the global pandemic, exchequer returns released on Wednesday will show.
The Department of Finance figures for tax revenues and spending in December will complete the economic picture, showing an exceptional resilience and recovery, despite the ongoing Covid-19 pandemic.
The figures will show that total tax revenues for the whole of 2021 will power ahead of the €57bn collected in 2020, and exceed the amount collected before the pandemic in 2019, which was itself a record year.
The 2021 record haul was driven by exceptionally strong returns from both income tax revenues and corporation tax revenues, while Vat receipts also held up well in difficult circumstances, the exchequer figures will show. For the second economic crisis in 10 years, corporation tax revenues paid by multinationals will again feature as a star performer.
Experts have pointed out that multinationals have so far shown little sign of turning their backs on investing in Ireland, despite the huge upheaval entailed by last year’s global tax agreement. The agreement is due to come into law by way of an EU directive in the coming years.
After its near-isolation in the OECD talks process, the Government in October reluctantly signed up to the agreement that will see Ireland’s headline rate of corporation tax rise to 15% from the longstanding rate of 12.5% for multinationals.
For the first 11 months of the year, corporation tax revenues of €13.5bn had already exceeded the €11.8bn collected from taxing companies for the whole of 2020.
December’s figures will complete the new annual record for the State for corporation tax revenues and will again raise concerns that over 20% of all tax revenues raised by the Government is derived from this single tax source.
December is one of the three most important months for the Government in terms of the amount of revenues collected from corporation taxes.
In the first year of the pandemic, in 2020, income tax revenues had brought in €22.7bn, after holding up well because of the billions in support the Government had injected into firms directly through the wage subsidy schemes and indirectly by preventing a slump in consumption through the pandemic unemployment payment.
The performance of income tax receipts has been hailed across most exchequers in Europe because the EU decided during the Covid crisis to back the correct policies rather than endorsing the austerity as it had done at the start of the financial crisis 10 years ago.
The tax revenue haul will also help to narrow the Government’s budget deficit.
Senior economist Jim Power said the momentum from the tax revenues in 2021 will carry through to the early months of this year.
He said the resilience over the last two years means that the public finances are in good shape should another Covid variant emerge, and predicted that this year will set another new tax receipts record.