Where Does the Money Come From?

Author

Mark D
January 09, 2025

So we looked at the 18 goverment departments, and got a rough understanding that the 2025 budget was a total of €105billion to run these departments. So the next question has to be: where does the money come from? 

To answer this, I found the Fiscal Monitors for 2024. This monthly publication by the Department of Finance provides a breakdown of government revenue and expenditure, accompanied by the Analytical Statement, a high-level Excel version that allows for deeper analysis.

Taking the monthly data from the Fiscal Monitors, I created a google sheet to help me understand it better. I focussed only on the Revenue first, we will come back to the expenditure analysis in these reports later.

The Sources of Revenue

Government revenue is collected from multiple streams, but broadly speaking, it can be categorized into three main groups:

  1. Tax Revenue

    • Tax revenue is the backbone of public finances, accounting for the majority of total income. For 2024, this includes key contributors:

      • Income Tax: The largest individual contributor, reflecting personal earnings and PAYE (Pay As You Earn) collections.

      • Corporation Tax: A significant portion of revenue, bolstered by Ireland’s vibrant corporate sector. Notably, one-off contributions like the "Apple CJEU" settlement also make an appearance.

      • VAT (Value Added Tax): Generated from consumer spending, VAT represents a stable and growing stream of income.

      • Smaller categories like Excise Duties, Stamp Duty, Motor Tax, and others also play a vital role.

  2. Appropriations-in-Aid (A-in-As)

    • This lesser-known but essential category includes receipts collected to offset specific expenditures. In 2024, A-in-As include:

      • Social Insurance Fund (SIF): Funded through PRSI (Pay Related Social Insurance) contributions from employers and employees, used to finance social welfare programs like pensions and jobseeker payments.

      • National Training Fund (NTF): Supported by employer levies, financing skills and training programs.

      • Other Appropriations-in-Aid: Miscellaneous income sources, including fees and grants.

    • These funds are crucial for reducing the government’s net expenditure requirements, as they are earmarked for specific purposes rather than general use.

  3. Non-Tax Revenue and Capital Resources

    • Although smaller in scale, these streams still play a role:

      • Non-Tax Revenue includes surpluses from bodies like the Central Bank and the National Lottery, as well as contributions from EU recovery funds.

      • Capital Resources are small but consistent, reflecting items like the sale of government assets.

The Details

If we look at the total of each category (and compare to 2023) we get this table

However this is quite signifcantly skewed by the ‘Apple CJEU’ monies that are recorded in the corporation tax line, per the exchequer this total €10,950m for 2024. If we remove that figure, the table looks like

Looking at the revised table, we can observe the adjusted contributions of each revenue stream after removing the one-off ‘Apple CJEU’ funds. Here are five key takeaways from this analysis:

  1. Corporation Tax Without Apple CJEU: Even without the one-off Apple CJEU funds, Corporation Tax remains a major revenue source, but its contribution drops from 30.64% to 24.12% of total revenue.

  2. Income Tax Dominance: Income Tax continues to be the largest consistent contributor, representing 30.09% of total revenue in 2024, a slight decrease in its overall share compared to 2023.

  3. VAT Growth: VAT demonstrates steady growth year-on-year, increasing its contribution to total revenue from 19.20% in 2023 to 18.74% in 2024, despite a slightly smaller percentage of total revenue.

  4. Appropriations-in-Aid Stability: A-in-As remain consistent, contributing 15.47% of total revenue in 2024, highlighting their critical role in funding earmarked expenditures like social welfare and training programs.

  5. Non-Tax Revenue Drop: Non-Tax Revenue sees a sharp decline, primarily driven by the absence of Brexit Adjustment Reserve contributions in 2024, which were present in 2023.

Visualizing the Revenue Flows

Another way to look at this data is to visualise the different revenue flows.

(2024 Revenue by Stream, Dept of Finance - Fiscal Monitor Dec24)

This type of visualization effectively shows the proportional contribution of each revenue stream to the total revenue, which for 2024 is projected at €127.5 billion.

Key insights from the diagram include:

  • Tax Revenue Dominates: At €108 billion, tax revenue is by far the largest component, with Income Tax, Corporation Tax, and VAT leading the way.

  • Appropriations-in-Aid are Significant: At €18 billion, A-in-As are a major part of the picture. While not as well-known as tax revenue, they’re vital for funding earmarked expenditures like social welfare.

  • Smaller but Steady Contributions: Non-tax revenue (€1 billion) and capital resources (€354 million) may seem minor, but they’re important for balancing the books and funding specific initiatives.

Why It Matters

Understanding where the government’s money comes from is essential for a healthy democracy. It helps explain how public services are funded and why transparency in finances matters to everyone, shows how public services are funded, highlights the balance between general taxation and earmarked contributions, and provides transparency about the role of non-tax revenue streams.

What’s Next?

This analysis focuses on revenue, but the next question is equally important: where does the money go? Future posts will explore government expenditure, examining how these funds are allocated to various sectors and services. Stay tuned for a deeper dive into the Fiscal Monitor and what it reveals about Ireland’s financial priorities.

How I Prepared the Google Sheet for This Analysis

I took the Analytical Statements (the high-level Excel version of the Fiscal Monitor) for the last 12 months and structured the data as follows:

  1. Copied Annual Cumulative Monthly Figures: Transferred the year-to-date totals for 2023 and 2024 into the sheet.

  2. Created Monthly Figures: Calculated the figures for individual months by subtracting the prior month’s YTD total from the current month’s YTD total. This approach provides a clearer month-by-month view.

  3. Developed a ‘Last Twelve Months’ (LTM) View: Structured the data to show rolling 12-month totals, making it easier to identify trends over time instead of just annual or monthly figures.

  4. Added Year-on-Year % Change Views: Compared the 2024 YTD figures to 2023 YTD figures to identify increases and decreases, both for cumulative totals and individual monthly figures.

  5. Enhanced Trend Analysis: Combined these views to build a comprehensive picture of revenue trends, allowing for deeper insights into the dynamics of government finances.