Buoyant Revenue surplus may ease EU woes

Exchequer figures for the first month of the year show a very strong position which, if trends continues, is likely to be enough to assuage the European Commission's criticism's of Ireland.

"The solution is at hand," Dr Dan McLaughlin, chief economist at ABN Amro noted.

Overall tax receipts are up 19.1 per cent in January from January 2000 and up from 14.9 per cent at the end of last year.

Analysts had expected a far lower number given that January 2000 figures were boosted by phenomenal car sales of 00 registered vehicles. One of the main contributors was income tax, up 14.3 per cent year-on-year having ended 2000 up 13.5 per cent for the year. The Budget day target was for a rise of 8.4 per cent on the back of continuing strong employment growth as well as wage rises.

If the current pace were to continue, it would mean full year income tax revenues of some £8.2 billion compared with a Budget target of £7.78 billion. The difference is enough to boost the surplus to 4.7 per cent of Gross Domestic Product - the only target on which the European Commission is still insisting. The Commission has recommended that there be no deterioration in the underlying budgetary position from 2000, when the surplus was 4.7 per cent. The current Government target is for a surplus of 4.3 per cent in 2001. Other tax headings were also up strongly, with the exception of corporation tax which is generally far lower in January than in other months of the year. VAT is up 19 per cent from a target of 17.7 per cent, while continuing house and share sales have boosted stamp duty by 61 per cent. Capital taxes were also up strongly at 59 per cent.

Excise duties are also up strongly, despite the holding of duties on cigarettes at the last Budget.

According to Dr McLaughlin this suggest retail sales are still growing. The figures for November, published last week, showed that, excluding cars, there was a strong acceleration from October.