Cantillon: tax surge brings balanced budget closer

Exchequer returns due on Wednesday will show another tax surge in November, a key payments month for corporates and the self-employed.

The monthly tally is now forecast to eclipse the official forecast by a sum well north of €500 million. This will be enough to beat the overall target for the year to November by more than €3 billion, with all signs now pointing to a total tax haul of more than €42 billion since January.

Put this in context. A €42 billion return in 11 months would be more or less the same as the Government originally projected for the whole of 2015. As economic growth accelerates, the December returns can therefore be seen as the equivalent additional month of revenue for the Government.

Take note that Minister for Finance Michael Noonan cast tax cuts on Budget day as a means of delivering the equivalent of one week’s extra pay to workers next year.

There is more. The published Department of Finance forecast points to tax revenues of some €3.3 billion in December. Assuming this money comes in, total revenues for the year would be north of €45 billion. It follows that the 2015 tax take looks like it will be close enough to the pre-crash peak, in 2007, of €47.25 billion.

It’s been a long time coming, but the pace of progress even in recent weeks is quite something. Budget 2016, unveiled only in mid-October, was predicated on a headline deficit this year of 2.1 per cent of gross domestic product, down from the original target of 2.7 per cent. Now there is talk that the Department of Finance assumes a year-end deficit at 1.4 per cent of GDP, a figure regarded as too conservative by some Coalition figures.

Budget 2016 assumes a 1.2 per cent deficit next year but that projection, like other aspects of the forecast, will have to be revised down. A balanced budget, previously foreseen for 2018, cannot be too far away now.