State coffers set for biggest surplus in five years

The State coffers could enjoy their biggest surplus in five years in 2006, one expert predicted last night after figures showed another strong month for tax returns.

Exchequer data released yesterday showed that the Government had collected €33.08 billion in taxes so far this year, compared with €29.42 billion during the same period in 2005.

The strong performance prompted Ulster Bank chief economist Pat McArdle to forecast that Government income for the year would exceed spending to the point where it would eliminate the €2.9 billion borrowing requirement forecast for this year.

During October alone, the Government collected €3.42 billion in taxes. Mr McArdle said this topped the Government's own expectations by just under €200 million.

He said this was slightly behind the average overshoot for the February to October period of €222 million but added that the Government's tax take was running well ahead of its forecasts.

"If revenue continues to overshoot at this pace, the cumulative overshoot will be €2.4 billion, not the €2.2 billion that the Minister predicted in mid-October when he unveiled his new pre-Budget Outlook for 2007," Mr McArdle said.

He pointed out that November was one of the most lucrative tax months of the year, as this was when most taxes from the self-employed were returned.

At the same time, he said there was a lot of scope for surprises in areas such as corporation and capital gains taxes. Mr McArdle said his best guess was that the Government's tax take could exceed Budget predictions by as much as €2.8 billion.

"When you allow for underspends on both current and capital spending, well nigh inevitable at this late stage, plus privatisation receipts, the original €2.9 billion Exchequer borrowing requirement will be more that wiped out," he said.

"This year is likely to see the largest Exchequer surplus since 2001 when it was €652 million," he said last night.

The figures released yesterday showed that State spending exceeded income by €345.5 million at the end of October. At the same point last year, it stood at €1.3 billion. Lower-than-expected Government spending has kept this deficit down in recent months.

October was also the month when the Government banked the €206 million it made from the controversial sale of Aer Lingus.

The figures also showed that it was continuing to take in large sums from stamp duty on house sales, at €149 million ahead of expectations in October.