State's coffers overflow as tax take matches boom
Published 02/12/2015 | 02:30
A surge in companies making profits and consumer spending has brought the country's cashflow within touching distance of the pre-crash record set in 2007.
Figures to be released today will show that Revenue Commissioners collected almost €500m more tax than predicted for November, and nearly €3bn in the year to date.
The boom-like Exchequer returns, which are primarily driven by corporation tax and VAT, have surprised even the most senior politicians and officials in Government.
"They are astronomical and will allow us to balance the country's budget much faster than planned," one source told the Irish Independent.
The figures for the first 11 months of the year will surpass Finance Minister Michael Noonan's targets for the full year - effectively meaning that any monies collected in December are unplanned.
It is understood that companies paid around €300m more in November taxes than anticipated by the Department of Finance and the total corporation tax collected this year is well over €2bn ahead of projections.
The chairman of the Revenue Commissioners, Niall Cody, has already written to the Department of Finance to outline that they believe the main reason for the huge rise in corporation tax is "improving trading conditions".
He noted that just €300m of the extra money collected could be considered as a windfall that will not reoccur in future years.
For the first time since the economic crash the Government has a surplus for the year, which is currently about €340m.
The figures are helped by a number of one-off transactions but sources say that even when they are excluded the figures are significant.
In Budget 2016, Mr Noonan announced tax cuts and spending increases of €1.5bn but indicated that the wiggle room for 2017 would be as little as €500m and €1bn in 2018.
However, sources told the Irish Independent that these figures would be revised upwards if the Government's coffers continue to perform as strongly as the past 11 months.
One source also pointed out that the Coalition has left provision in its recently announced Capital Investment Programme for a review in 2017.
"We might be able to add in more projects if there is more money available," said the source, who noted that would be for the next government to decide.
However, the figures come just a week after the State's budget watchdog, the Fiscal Advisory Council (FAC), warned "the fiscal forecasts in Budget 2016 do not provide a meaningful anchor for medium-term budgetary planning".
FAC chairman John McHale has said the Government has deviated from prudent economic management in the Budget and compared its policies to those of the boom era.
Last night, Mr Noonan confirmed that the Department of Finance expects its forecast for the end-of-year budget deficit - which started out at 2.7pc of gross domestic product - to be substantially reduced.
Speaking at an Oireachtas committee, he said the State was on course to have a balanced budget ahead of a 2018 deadline. He indicated the deficit this year could finish up at between 1.6pc and 1.8pc.
The minister said the Coalition had been "extraordinarily prudent" with the public finances and was growing the economy "across all sectors".
"The chairman of the Revenue Commissioners said the flow of corporation tax is not cyclical ... and that the vast bulk will be repeated next year because it comes from increased business activity across the sectors, whether it's foreign direct investment sector or whether it's indigenous Irish business.
"They're all trading more, they're making more profit and they're paying more tax," he said.
Meanwhile the Government has still not agreed on a final supplementary budget for the Department of Health, which is reported to be seeking an extra €100m on top of the €600m already agreed.