LAST YEAR SAW corporation tax receipts soar to record levels, according to end of year exchequer returns published today by the Department of Finance but McGrath warns that growth will continue at more modest levels into the future.

For a second year in a row, corporation tax was the state’s second largest source of tax revenue. Some €23.8b was collected this year, a 5.3% increase (€1.2b more) on 2022.

This 5.3% increase represented a more modest growth rate than was the case in previous years.

Minister for Finance Micheal McGrath said this afternoon that it is important to place this growth in context and noted the “exceptional” volatility in corporation tax receipts during the second half of last year with a large decline in a number of key payments.

He noted that while corporation tax receipts for last year were marginally ahead of expectations, it was far below the almost 50% growth seen in 2022. 

“So it is clear the pattern of the last few years for corporation tax consistently over performs projections and has not been repeated. I expect corporation tax to continue to perform steadily across 2024 but at a much more modest growth rate than we have enjoyed in recent year,” he said. 

Income tax receipts were the largest source of tax revenue last year at €32.9b. This was up 7.1% or €2.2b on 2022.

McGrath said today the tax receipts “came in largely as anticipated and reflect the underlying strength of our economy, especially the labour market.”

In total, there was an Exchequer surplus of €1.2 billion in 2023, down from €5b the previous year. 

This difference was largely driven by factors including increased public spending and the transfer of €4b to the National Reserve Fund (NRF) in February last year.

Although McGrath was optimistic about living standards this year, he warned of the risks to Ireland’s public finances, citing a “weak” and uncertain global outlook, Ireland’s high public-debt ratio and a reliance on 10 multinational companies providing over half of its total corporate tax base.

After four consecutive quarters of GDP negative growth for 2023, McGrath said they were expecting to see an improvement in 2024, and is expecting a surplus of €8b for the third consecutive year.

On living standards, McGrath noted a “modest uptick” in inflation in Ireland last month but said that it was still predicted to average at 3% over 2024.

He said this year would see cost-of-living conditions improve for people.

“The pathway back to 2% inflation is not necessarily going to be a smooth one, or operate in a straight line – there will be bumps on the road,” the minister said.

“It’s important to give people our sense and our judgment, which at this point in time is that living standards will improve across 2024 for the vast, vast majority of people in Ireland and I think that is essentially a good news story,” McGrath added.

With reporting from Press Association.