The economy is continuing to expand, with tax receipts up some 15.5 per cent in the first five months of the year, according to the latest figures from the Department of Finance.
The booming revenue, under practically all headings, suggests that by the end of the year the Government will have millions more than it has forecast in its coffers.
The latest Exchequer statement issued yesterday shows a surplus of receipts over expenditure of some £615 million in the first five months, well ahead of the official target.
The booming tax revenues mean the economy is probably still growing by about 10 per cent per annum, according to Dr Dan McLaughlin, chief economist at ABN Amro. He says this is consistent with continuing employment growth of 5 per cent. "There is no evidence out there that the domestic economy is slowing down."
According to recent data, consumer spending was up some 13.9 per cent by value in March and 12.9 per cent in volume, pointing to inflation of only around 1 per cent.
The Exchequer figures for the end of May reveal that VAT receipts are up some 15 per cent so far this year and excise duty by 15.5 per cent. Income tax has risen some 10.5 per cent to £2.56 billion, well ahead of the Budget target.
According to Dr McLaughlin, the Budget is based on an overall 7.5 per cent rise in tax. Thus if receipts were to keep growing at 15 per cent, the Government would have an additional £1.2 billion in revenue it had not bargained for.
But even if receipts slow down to some 10 per cent, the Minister for Finance, Mr McCreevy, will be looking at an additional £500 million to play with on Budget day, with an overall surplus of £1.4 billion. "The bottom line is the Government could have cut taxes much more significantly than it did or could have spent much more on the capital side," Dr McLaughlin added.