Buoyant tax receipts, driven by strong economic growth and the continuing property boom, have delivered a record exchequer surplus for 2006, writes Dominic Coyle, Deputy Business Editor.
Figures published yesterday by the Department of Finance show the exchequer recorded a surplus of €2.265 billion compared to a deficit of €499 million in 2005.
At the outset of last year the Government had forecast it would have to borrow €2.9 billion to balance its books.
The surplus is also 22 per cent ahead of the updated end-year forecast published at the time of the Budget last month.
Revenue was stronger than expected across all tax headings, but property-related capital taxes were the most significant contributors to the €3.9 billion overshoot.
Both stamp duty and capital gains tax receipts were more than €1 billion ahead of projections, and between them accounted for 54 per cent of the total increase over targeted figures.
The Government last year collected €3.7 billion in stamp duty and €3.1 billion in capital gains tax.
Corporation tax receipts grew twice as fast as expected to €6.7 billion, 22 per cent ahead of the 2005 figure.
"The economy is much stronger than anticipated at the start of last year," said Barra Ó Murchadha, principal officer at the Department of Finance budget and economics division. "In addition, where we had anticipated some slowdown in the property market it has continued to grow strongly, as has the stock market."
Income tax receipts of €12.4 billion were up almost 10 per cent on the 2005 return and 4.3 per cent ahead of department projections.
VAT, the single largest category of tax revenue, rose 21.7 per cent over 2005 to €13.4 billion.
Overall, tax income was 16 per cent ahead of 2005 compared with a budgeted increase of 6.1 per cent.
Other factors contributing to the surplus were the €240 million windfall from the flotation of Aer Lingus and better-than-expected returns from the sale of State property.
Government spending was behind target by €682 million.
Delays in getting the nursing home charges repayment scheme up and running accounted for €324 million of the €515 undershoot in current spending last year. Just €16 million of the €340 million budgeted for the scheme was spent.
On the capital side, health accounted for the most significant underspend. However, the Government was also behind schedule in acquiring property outside Dublin to facilitate decentralisation.
Philip Hamell, head of the finance directorate at the Department of Finance, said the OPW expected the carry-over to be spent within the first quarter of the current year.
Minister for Finance Brian Cowen said the results highlighted the "prudent and far-sighted approach being taken by the Government to planning the nation's finances".
He pointed to General Government Debt which, at year end, stood at some 25 per cent of GDP, down from 27.9 per cent a year earlier and 63.6 per cent when Fianna Fáil and the PDs first came to power in 1997.
However, Fine Gael's finance spokesman Richard Bruton criticised the increased dependency of the Government on the property sector, which, he said, accounted for 25 per cent of Government revenue in 2006.
He added that tax receipts "confirm the Government has raised a greater proportion of national income in tax than any government since 1990".
Labour finance spokeswoman Joan Burton said the €5.2 billion gap between initial forecasts and the eventual out-turn represented "a serious failure" of forecasting and financial management.
"Had the Minister gotten his sums right he could have used part of that €5.2 billion to either reduce taxation or to improve public services."
Analysis: page 16