Exchequer Position Overview Jan-June 2022: Revenue and Expenditure Analysis

Exchequer position overview Jan-June 2022 million y/y change, % (unless stated) Total revenue 50,206 +13.4 : tax revenue 36,884 +25.0 : non-tax revenue 5,904 -18.1 of which: technical loan to the SIF (net neutral) 2,380 -47.7 : appropriations-in-aid 7,418 -2.1 Total expenditure 46,018 -7.2 : current 35,802 -4.3 : capital 2,715 +9.2 : non-voted expenditure 7,501 -22.5 of which: technical loan to the SIF (net neutral) 2,380 -47.7 Exchequer balance 4,188 +9.5 billion^ ^+ implies improvement 2 An Roinn Airgeadais | Department of Finance

Exchequer Returns: revenue developments in first half 2022 3 An Roinn Airgeadais | Department of Finance

Tax revenue: 2022 H1 vs 2021 H1, millions 29,501 total 36,884 Total: up 7.4 billion (25%) Excise: flat (policy decisions) 1,811 other 2,173 CT: up 3 billion (53%) 2,536 excise H1 2021 2,586 H1 2022 5,743 VAT: up 1.9 billion (26%, re-opening, warehousing) corporation tax 8,780 7,203 VAT 9,088 Income tax: up 2 billion (17%, labour market rebound, warehousing) 12,208 income tax 14,257 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 4 An Roinn Airgeadais | Department of Finance

Exchequer Returns: expenditure developments in first half 2022 5 An Roinn Airgeadais | Department of Finance

Voted current expenditure: 2022 H1 vs 2021 H1, millions 37,428 total 35,802 Total current down 1.6 bn (-4.3%) 16,117 social protection 12,080 Social Protection spending down by 4 bn H1 2021 9,372 health 10,622 H1 2022 Health spending up by 1.25 bn 6,948 other 7,641 4,114 education 4,352 877 children 1,107 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 6 An Roinn Airgeadais | Department of Finance ^ gross figures

Voted capital expenditure: 2022 H1 vs 2021 H1, millions 2,487 total 2,715 Total capital up 0.25 bn (9.2%) 985 other 912 H1 2021 585 housing 553 H1 2022 Environment capital spending up c. 0.4 bn ( Electricity Credit ) 78 environment 492 534 transport 385 305 education 373 0 500 1,000 1,500 2,000 2,500 3,000 7 An Roinn Airgeadais | Department of Finance ^ gross figures

Summary H1 tax revenue = 36.9 billion - annual increase of 7.4 billion (25 per cent) - corporation tax exceptionally strong : cannot be guaranteed to remain at these levels - income tax and VAT also strong - annual comparison flattered due to base effects : stringent lockdown in q1 2021 a n n u a l i n c r e a s e o f 1 . 1 p e r c e n H1 gross voted expenditure = 38.5 billion - 1.4 billion down on H1 2021 : Social Protection expenditure down by 4 billion a h e a d o f p r o f i l e - current = 4.3 per cent down on H1 2021 - capital = 9.2 per cent ahead of H1 2021 Rolling Exchequer surplus of 2.1 billion at end-H1 - several factors (NAMA, AIB, BOI, CBI surplus income etc.) flatter the position 8 An Roinn Airgeadais | Department of Finance

Summer Economic Statement 9 An Roinn Airgeadais | Department of Finance

Economic (domestic) context for SES Resilience post-pandemic but exit from pandemic not entirely smooth Demand-supply imbalances giving rise to decades-high inflation, compounded by war-induced energy prices Ireland Rapid rebound in employment highest level ever and near full employment Euro area 2,500,000 11 latest (April) = 2.344 million 10 2,400,000 pre-pandemic = 2.224 million 9 2,300,000 8 2,200,000 7 6 2,100,000 5 2,000,000 4 1,900,000 3 2 1,800,000 1 1,700,000 0 1,600,000 -1 -2 1,500,000 May-19 May-20 May-21 May-22 Jan-19 Jan-20 Jan-21 Jan-22 Sep-19 Nov-19 Sep-20 Nov-20 Sep-21 Nov-21 Mar-19 Mar-20 Mar-21 Mar-22 Jul-19 Jul-20 Jul-21 2019M01 2019M04 2019M07 2019M10 2020M01 2020M04 2020M07 2020M10 2021M01 2021M04 2021M07 2021M10 2022M01 2022M04 10 An Roinn Airgeadais | Department of Finance Note: data refer to employees and do not cover self-employed

Economic (international) context for SES Energy price shock taking toll on main export markets while market participants expect tightening monetary policy OECD forecasts (June) incorporate significant downward revision vs previous Market participants pricing in policy interest rate increases in all major advanced economies 0.0 Euro area United States United Kingdom 3.5% 3.0% -0.5 2.5% -1.0 2.0% 1.5% -1.5 1.0% 0.5% -2.0 0.0% -2.5 -0.5% DE FR Euro Area World US UK Jul-2016 Jul-2017 Jul-2018 Jul-2019 Jul-2020 Jul-2021 Jul-2022 Oct-2016 Oct-2017 Oct-2018 Oct-2019 Oct-2020 Oct-2021 Oct-2022 Jan-2016 Jan-2017 Jan-2018 Jan-2019 Jan-2020 Jan-2021 Jan-2022 Jan-2023 Apr-2016 Apr-2017 Apr-2018 Apr-2019 Apr-2020 Apr-2021 Apr-2022 Apr-2023 11 An Roinn Airgeadais | Department of Finance

Fiscal context for SES Borrowing costs on rising trajectory Exit from QE has resulted in sharp increase in 10-year sovereign borrowing costs against a backdrop of very high public debt Public debt is nearly a quarter of a trillion euros programme pandemic Ireland Germany Italy recovery Financial pre-crisis EU/IMF crisis 5 100,000 4 50,000 For Ireland, 2 pp increase in borrowing costs in c. 6 months 3 0 -50,000 2 -100,000 1 -150,000 -200,000 0 -250,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 -1 Jan 2021 Mar May Jul Sep Nov Jan 2022 Mar May surplus deficit revenue debt 12 An Roinn Airgeadais | Department of Finance

Very modest surplus in prospect all due to corporation tax overshoot Corporation tax receipts paid by top 10 firms, share of total Tax overshoot: - pandemic-proof sectors -modest surplus in 2022 / 2023 55% 50% Corporation tax surprises account for the surplus - 1 in 4 total receipts from corporate sector : 2011 CT = 3.5 bn : 2021 CT = 15.3 bn -indirect receipts (through employment) even larger 45% Over half of CT receipts due to 10 firms - 1 in 8 total receipts from 10 firms 40% Serious vulnerability for public finances 35% 30% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 13 An Roinn Airgeadais | Department of Finance

Budgetary strategy: qualitative terms Need to be aware of trade-offs once again - Borrowing costs are rising - Public debt is very elevated ( 47k per capita) - Significant medium-term challenges (CT concentration, ageing, climate and digital transitions) Need to adapt spending strategy to mitigate impact of higher inflation - Government cannot fully offset impact of inflation - Balance between providing support and not adding to inflation Need to adapt taxation strategy to avoid bracket creep effects of inflation Need to be conscious of medium-term fiscal challenges - ageing population [ stand-still cost = c. 7 billion per annum by end-decade ] - finance climate and digital transitions - build-up buffer to falling corporation tax revenues n n u a li n c r e a s e o f 1 . 1 p e r c 14 An Roinn Airgeadais | Department of Finance

Budgetary strategy: quantitative terms 2022 2023 2024 2025 billions Total core spending 80.1 84.1 88.3 92.8 SES 2021 Change 4.0 4.3 4.5 : ELS 3.0 3.2 3.4 a : new measures 1.0 1.1 1.1 b Tax measures 0.5 0.5 0.5 c Total budget package 4.5 4.8 5.0 a+b+c Inflation adjustment to core spending 1.65 SES 2022 d Inflation adjustment to taxation 0.55 e Total budget package 6.7 4.8 5.1 a+b+c+d+e memo: Total core spending 80.5 85.8 90.1 94.6 Change (per cent) 6.5 5.0 5.0 Non-core spending 7.5 4.5 0.7 0.4 Total voted spending 88.0 90.3 90.8 95.0 15 An Roinn Airgeadais | Department of Finance Note: rounding may affects totals

Conclusion 16 An Roinn Airgeadais | Department of Finance

Summary and conclusion Tax revenue has over-performed corporation tax receipts a serious vulnerability for the public finances Domestic economic: loss of momentum in second half revised forecasts in Budget 2023 [ part of EU budgetary cycle ] Risks to outlook are firmly tilted to downside withdrawal of Russian gas supplies Fiscal context for addressing inflation shock is very different to pandemic borrowing costs on a rising trajectory a n n u a l i n c r e a s e o f 1 . 1 p e r c Budget 2023 will be a cost of living budget helping with higher prices but not adding to inflation o f p r o f 17 An Roinn Airgeadais | Department of Finance