A Christmas spending splurge by consumers generated more than €3 billion in VAT receipts for the Government in January. This was €400 million more than in the first month of 2020, before Covid hit.
The latest exchequer data published by the Department of Finance shows the Government collected €6.7 billion in tax last month, up 24 per cent (€1.3 billion)on the same month last year.
Some €3.1 billion came from the sales tax as consumers spent more in shops and online in the lead-up to Christmas and during the post-Christmas sales period.
Separate data from the Central Bank this week indicated that debit and credit card spending, including ATM withdrawals, hit a record €8.4 billion in December.
“January is generally the strongest VAT-due month of the year, incorporating the Christmas trading period, and accordingly, receipts of €3.1 billion were collected, up by over €0.7 billion or 32 per cent on January 2021,” the department said.
Reduction
However, it cautioned that receipts in 2021 were affected by the temporary reduction in the standard rate of VAT and the introduction of stringent public health restrictions, effectively flattering the year-on-year comparison.
When compared with January 2020, a more stable base, receipts were up by €400 million or 15 per cent.
The Government’s other big tax channel, income tax, generated €2.6 billion in January, 13 per cent up on the same month last year, reflecting an ongoing recovery in the labour market, while corporation tax netted the exchequer €81 million. January is not typically a significant month for the business tax.
On a 12-month rolling basis, the exchequer recorded a €6.4 billion deficit in January, driven in the main by spending on Covid supports.
Total expenditure for January was €7.1 billion. Of this, gross voted expenditure stood at €6 billion, which was €300 million below the same period in 2021.
This is driven by a decline in social protection spending due to pensions being paid for a fifth Friday in January 2021 and also due to a decline in expenditure on the Pandemic Unemployment Payment (PUP).
Minister for Finance Paschal Donohoe said: “Today’s figures show that the strong momentum in tax receipts has continued into the start of this year.”
“While annual comparisons flatter the performance of tax receipts, the underlying trends are a positive sign of the strength of the domestic economic recovery,” he said.
“Since the pandemic began, the Government’s approach has been to support the economy through a counter-cyclical budgetary policy to mitigate the effects of the Covid-19 outbreak,” he said.
“This has led to a significant increase in public debt which is now approaching a quarter of a trillion euro, the equivalent of €47,500 per capita, a figure that is amongst the highest in the developed world,” Mr Donohoe said.
Cost
The Minister said the fiscal cost of the pandemic has been enormous but a cost worth bearing.
“The Government’s approach has worked well, and Government has established the foundations for the strong domestic recovery seen to date,” he said.
“With private demand now accelerating rapidly and supply bottlenecks already evident in some sectors, it is essential to slow the growth rate of public demand in order to avoid overheating the economy; counter-cyclical budgetary policy works in both directions,” he said.
Minister for Public Expenditure and Reform Michael McGrath said the January spending figure of almost €6 billion reflected the continued support of people, public services and the economy throughout the challenges of the pandemic.
