ANALYSIS:THE EU-IMF bailout oversight teams arrive in Dublin at the end of this week for their quarterly inspection of the economy's management. On the basis of yesterday's exchequer figures for the first half of the year, the kind of fireworks the troika had in Athens with that country's authorities are not in the offing in Dublin.

The hard money indicators in the memorandum of understanding, the document which sets out a quarter by quarter schedule of reforms and targets, have been met for the second quarter of 2011. Revenue, spending and the imbalance between the two appear broadly on target.

Tax revenues are one side of the budgetary equation. They are additionally important in that they give an indication of the state of the economy. In June, revenues were up by more than 7 per cent on the same month in 2010. For the full second quarter (April-June), the tax take came to €7.8 billion. That was an increase on the second quarter of 2010 (of 9 per cent) and an increase on the first quarter of this year (of 3.6 per cent).

Although positive, these developments are not as healthy they appear at first sight. Without the big increases in taxation measures introduced in the December budget, revenues might well be down. In other words, it is not a stronger economy that is causing revenues to rise, but a greater tax burden. There is a limit to the amount of new taxes that can be levied.

The figures overstate the underlying position in another way, too. Much of the large headline increase in income tax revenues is the result of an accounting change. Since the last budget, a chunk of revenue raises which once went to other departments are now included in the income tax heading which is administered by the Department of Finance.

Most notably, this included social insurance contributions. These have traditionally been the third largest single revenue source (but have not been included in the monthly exchequer figures). Some of these revenues are now included in the exchequer accounts.

A detailed breakdown of the tax figures shows that corporation tax revenue was more than 10 per cent below the figure recorded in the first half of 2010.

It is hard to see why the underlying position would have deteriorated so much. Foreign companies pay between half and three-quarters of corporation tax. Their sales are booming. Their costs are likely to be falling. Their profits should, therefore, be up.

Their additional contribution to the State’s coffers should at least be offsetting any lower revenues that hard-pressed companies focused on the domestic economy are facing.

The headline decline in the first half of the year could be explained by timing issues – corporate treasurers juggle all kinds of payments. They may have postponed some tax payments to the second half of the year. If this is the case, there may well be a positive surprise later in the year.

A big boost to revenues came from the banks coughing up almost €600 million for the guarantees taxpayers have given them. It may be satisfying to see money being wrung from the banks – given that nobody is more culpable for the mess the economy is in – but for the State to be taxing mostly State-owned banks at a time when they are so fragile may not make much sense.

Spending is the other side of the budgetary equation. Total exchequer spending is little different compared to the first half of last year, though accounting changes have again muddied the waters somewhat. What is clear, however, is that public investment spending is being slashed, while day to day spending continues to rise.

There is a strong case for investment spending to be cut dramatically in an emergency, but if those savings allow pressure to be eased on other spending departments seeking savings, it must be less welcome.