Cowen hails tax boost to public finances

Just under €1bn more taxes than expected were collected by the Government in the first six months of this year, it was announced today.

And public spending was €550m less than forecast, according to the Department of Finance.

It was expected the state would have to borrow €3bn to balance its books at the end of this year, but the figure could now be cut to less than a half of that.

The overall Exchequer surplus was €880m for the first half of the year, compared to a deficit of €594m for the same period last year.

“These half year results confirm that the public finances are in a sound position,” said Minister for Finance, Brian Cowen.

“Tax revenues are performing well, and public expenditure growth is within the targets set for it.”

He added: “While these results are positive, it is important that we remain vigilant by maintaining fiscal policies that support our economic growth and competitiveness, and that continue to provide the resources for the major programmes of social and capital spending to be undertaken by this government over the next several years.”

The huge €980m excess in tax was down to strong returns in Corporation Tax, Stamp Duty and Capital Gains Tax.

A handful of large companies paying out more than expected brought the Corporation Tax figure up.

The big three taxes – Income Tax, VAT and Excise – were all nearly on target, coming in around €9m over budget.

While public spending came in below target, Government departments have indicated outgoings will increase in the second half of the year.

The Department of Agriculture and Food underspent by €66m, while social welfare payments were €30m under budget.

Business leaders attributed the financial boost to the buoyant property market and strong consumer spending.

“A prudent approach to public expenditure in Budget 2007 is now required,” said IBEC Senior Economist Fergal O’Brien.

“Rising interest rates could well cool both the housing market and consumer spending in the near future and recent history has shown that Government cutbacks can quickly follow a pre-election give-away Budget.

“The interests of business and the public will be best served by a measured approach to public expenditure,” he said.

The Labour Party Finance Spokeswoman Joan Burton said low returns in some taxes suggested displacement issues, loss of higher paid manufacturing jobs and possibly increasing numbers of people employed at lower wages.

Fine Gael’s Finance Spokesman, Richard Bruton, urged the Government to resist the temptation to ratchet up spending in advance of the general election at the expense of the economy.