Tax collection is running close to €500 million ahead of target this year but a VAT shortfall raises questions about the strength of consumer spending.

As political talks continue, exchequer returns from the Department of Finance point to relative strength in the public finances as a Fine Gael-led minority government prepares to take office.

Talks between Fine Gael and two groups of Independent TDs have intensified in an effort to have a new government in place by the weekend.

The Independent rural TDs and the Independent Alliance members are to be given a draft programme for government at a meeting today.

It is understood the Independents have secured concessions in the areas of health, agriculture and rural Ireland. The talks were continuing late last night.

Fine Gael sources insisted a vote for taoiseach could take place today but admitted it was more likely to take place tomorrow.

The exchequer returns will be encouraging for the new government in that the overall level of spending remains under control.

However, they also reflect the onset of pressure on the health budget, which signals potentially major problems for the incoming administration.

Year-on-year improvement

The exchequer was in deficit by €1.055 billion at the end of April, a year-on-year improvement of €1.27 billion which was attributed to the increase in overall tax revenue.

The figures were released on same day as data showing the unemployment rate dropped in April to 8.4 per cent from 8.6 per cent in March.

The State collected €14.04 billion in the first third of the year, €1.17 billion more than last year and €475 million more than forecast by the department.

“April is not significant in terms of corporation tax receipts and is not a VAT due month . . . However, there were some significant one-off and timing factors, which have helped flatter the April tax position,” the department said.

Collections of Value Added Tax, the tax on sales, remain ahead of 2015 at €4.17 billion but the return was €161 million behind target for the first four months.

Corporation tax collections are running well ahead of profile. The €759 million out-turn in four months was €315 million or 70.8 per cent more than projected.

Income tax

The collection of €6.1 billion in income tax in four months was on target, with a shortfall in earlier months recovered by a €158 million overperformance in April. The department cited “one-off payments” in April, but said the overall outturn was broadly consistent with recovery in the labour market and increased earning.

On the expenditure side, some €13.65 billion in net voted spending over four months was €89 million below target and €68 million lower than last year.

While 15 of the 16 government departments were on or under profile, health spending was €78 million ahead of target at the end of April.

This is generally seen to be a sign of a major deterioration in the health budget later this year, something that comes amid pressure on public pay and demands for additional spending in the political talks.

Total exchequer debt servicing costs in the first four months of the year reached €3 billion, down €81 million on the same period last year on foot of early IMF repayments.