Strong tax inflows create £698m surplus

Exceptionally strong income from taxes in January produced an unprecedented surplus of Government receipts over expenditure of £698 million (€886 million), according to the latest Exchequer returns.

The latest surplus compares with a £72 million for January 1999.

One economist described it as "a whopping difference" but warned against placing too much importance on the figures for one month which could be influenced by timing differences.

The figures show very strong growth in tax revenue, up 22 per cent year on year at £1,785 million. At the same time total expenditure was £242 million, or 16 per cent down, on the January 1999 figure.

Describing the strong tax figures as "testimony to the continuing vibrant growth in the economy, particularly on the consumer spending side", the chief economist at Davy Stockbrokers, Mr Jim O'Leary, said they were "a foretaste of things to come".

He forecast that the Budget target tax growth for the year of 9.6 per cent would be well exceeded but warned that overall annual growth would be well below the 22 per cent January rate. This is largely because Budget tax giveaways in excess of the previous year will start to affect tax receipts from May.

Significant increases in tax receipts were recorded across the board. VAT receipts were 22 per cent higher reflecting strong sales over the Christmas period.

Income tax receipts rose by 18 per cent to £575 million reflecting the continuing increase in the numbers at work. Mr O'Leary said the latest income tax figure looked much stronger against relatively sluggish income tax year-on-year growth of only 5 per cent in January 1999.

Corporation tax jumped by 80 per cent to £56 million. A 7 per cent rise in excise taxes reflected the Budget increase in tax on tobacco and the surge in new car sales.

Economists said the expenditure figures were more difficult to explain and generally reflected timing oddities, including interest payments to service debt. They warned against using the January figures to extrapolate an outcome for the year.

Mr Dermot O'Brien economist with NCB Stockbrokers described the January surplus as "extraordinary". Revenue growth was very healthy, but the expenditure figures were likely to include timing factors which would change in coming months, he said.