The latest figures from the Department of Finance show that the Exchequer recorded a deficit of €136m in the nine months to the end of September. This compares to a deficit of €1.123 billion the same time last year and a budgeted deficit of €2.926 billion for the whole of 2006.
Today's figures reveal that tax revenue at €26.659 billion is €1.807 billion ahead of targets by the end of September. Year on year, tax receipts are up 12% compared to an expected increase of 5% at Budget time last December.
70% of the extra taxes came as a result of the continued strength in the housing market, as well as a greater than expected tax yield from the business sector.
Among tax revenues, the best performers are Stamp duty which is €687m ahead of targets, Corporation Tax which is €321m ahead of forecasts, Capital Taxes, up €317m ahead of targets and VAT, which is €296m ahead of December Budget targets.
The figures also show that overall net spending amounted to €27.082 billion for the nine months to the end of September. This compares to €24.670 billion the same time last year, an increase of 9.8%. The Department of Finance says this is well within targets.
'Overall tax revenue is ahead of profile and public expenditure is within the targets set for it,' commented Finance Minister Brian Cowen.
'These results, combined with recent CSO data, show that the Irish economy continues to perform well ahead of our EU partners,' the Minister added.
'It is important that we put this economic performance to good use by building up our infrastructure, maintaining our competitiveness and ensuring a fairer distribution of society's resources. These will be among by aims for the forthcoming Budget,' Mr Cowen said.
The bottom line as regards the out-turn for 2006 is that if tax revenue growth remains in high double digits, as we expect, then the overall budget situation this year will be a lot healthier than envisaged at Budget time, and we still think there is every chance the Government will post a surplus of close on €500m come year-end,' commented Alan McQuaid from Bloxham Stockbrokers after the release of today's figures.
'Such an outcome would provide plenty of scope for a generous Budget and major tax concessions (if so desired) in 2007, ahead of the General Election,' he added.
He said that given the Taoiseach's current political difficulties, Fianna Fail could be tempted to loosen fiscal policy dramatically either through tax cuts and/or major expenditure increases in key Departments to woo the electorate.
'However, with inflation already running at an undesirably high level, the Minister for Finance should resist any such temptation as a serious loosening of fiscal policy is not warranted at this stage, especially as the bulk of the SSIA funds are due to mature in 2007, with the potential to add to inflation woes through a significant level of personal spending,' Mr McQuaid warns.
Meanwhile, Pat McArdle, chief economist with Ulster Bank, says that one thing which many commentators fail to take into account is the nature of the overshoots this year. He says that they are predominantly related to the property market.
'If housing slows, these receipts will tail off, leaving the opening Budget Deficit for next year higher than otherwise,' he points out.
'The reason for most of this year's overshoots was the Department's assumption that the housing market would cool. Odds are they will do the same again next year,' Mr McArdle says.
'Big overshoots this year do not necessarily mean that next year's Budget benefits accordingly. Minister Cowen may yet have his work cut out as he strives to deliver a pre-election Budget that keeps everyone happy', the economist adds.
