Recovery continues as tax take €1.4bn ahead of target

The Government remains on course to significantly beat its annual tax target for 2015 with data showing tax revenue in the year to date is almost €1.4bn ahead of forecast.

Latest exchequer returns, published yesterday by the Department of Finance, show tax receipts up to the end of August amounted to €27.34bn, up 10% and 5.4% ahead of expectations.

This has lead some commentators to forecast that the general budget deficit could shrink to 2% of GDP by year’s end.

The official forecast is for 2.3% of GDP, down from 4.1% last year.

A strong showing last month across all the major brackets including income tax, corporate tax and Vat contributed to the exchequer deficit lowering by over €5bn, to just under €1.3bn, year-on-year.

“The recent strong economic and jobs data, coupled with the strong exchequer performance to date means we are well on track to exceed our targets for 2015. The public finances are in a strong position as we prepare to deliver Budget 2016 next month,” Minister for Finance Michael Noonan stated yesterday.

According to Peter Vale, tax partner at Grant Thornton, the latest strong figures will “undoubtedly result in even more calls for tax cuts and spending increases.”

“Ironically, a more conservative set of numbers may have suited Minister Noonan more.

"In our view, next month’s budget will continue the trend set in recent budgets, with a heavy focus on employment. Any tax cuts or new reliefs will be heavily weighted towards job creation,” he said.

However, caution has also been called for.

“The Government needs to tread carefully and not lose the run of itself, in light of concerns about the health of China and the global economy, in general.

"As a highly open economy, Ireland is more vulnerable than most to an external shock,” said Merrion Stockbrokers chief economist Alan McQuaid.

“Looking at government spending, net voted current expenditure was 0.9% or €231m below that in January-August 2014, at €25.8bn.

“But on the negative side, there was an over-run on health of €649m last year and another significant over-run in this area in 2015 looks to be on the cards,” he said.