The final set of tax returns for 2015 points to the huge distance travelled since the worst days of the crash – and the emergent opportunity to recast long-term plans for public services and investment.

The figures show the State collected €46.6 billion in tax last year, with receipts forecast to reach €47.2 billion in 2016. Such an outturn would bring tax collections back to the level seen in 2007 before recession struck and the banks fell over, when the State took in €47.25 billion.

Thus the recovery in tax revenue has been a long time coming. Amid full-blown crisis, receipts dropped to €31.75 billion by 2010. It was 2014 before revenues came in ahead of €40 billion again.

In sum, it has taken the best part of a decade to take revenue back close to pre-crisis levels. This is quite an achievement in terms of the management of the public finances, but it was not without great and prolonged cost for individual taxpayers.

Political imperative

This explains the political imperative to deliver a return via tax concessions in this year’s budget, which kick in this month, alongside an increase in the minimum wage. With the general election imminent, we will know soon enough whether such measures suffice to ensure the return of the Coalition in the face of the inevitable Opposition onslaught.

The 2015 figures stand as the public finances report card from Fine Gael and Labour before they present themselves to the electorate. Put another way, the data can been as a student’s major essay before the final exams.

The script for the hustings is predictable enough by now. As Minister for Public Expenditure Brendan Howlin merrily pointed out, the underlying deficit in 2010 was 11 per cent of gross domestic product and €18.7 billion in cash terms. That was Fianna Fáil’s last year in office before the February 2011 election. In terms of raw cash in 2015, Howlin added, the deficit was now just €62 million.

The all-important fiscal rules mean the Government cannot include once-off receipts last year from Allied Irish Banks and Permanent TSB in the deficit. Even so, the 2015 headline deficit came in at about 1.5 per cent of GDP and a deficit about 0.75 per cent of GDP is now in prospect for 2016.

Notable in 2015 was the surge in corporation tax receipts, which advanced by 49 per cent to come in at €6.9 billion. Citing a letter from Revenue chairman Niall Cody, Minister for Finance Michael Noonan is adamant that the forecast of a €6.6 billion corporate tax return for 2016 is not built on sand.

Even so, analysts urge caution. “Ten companies represented half of the corporation tax take in the first 10 months of 2015, whereas traditionally the top 10 accounted for just 25 per cent of the total,” said Dermot O’Leary, chief economist at Goodbody.

Income tax receipts

Leaving aside corporate tax, the improvement in tax revenue is also being driven by improved income tax receipts as people return to work and improved value-added tax as consumers spend a little more of their disposable income. Noonan made the case that this would improve further this year on the back of increased employment and the prospect of wage increases, including the minimum wage rise.

He told reporters at the Department of Finance that increased corporate tax and income tax returns in the final three months of 2015 took 0.5 percentage points from the 2.l per cent of GDP deficit target set out for last year in the October budget.

A further 0.1 percent point benefit arose from the fact that net spending came in €271 million behind the revised target set out when the Government provided €1.5 billion in supplementary estimates on the eve of the budget.

If the 2016 deficit does indeed come in at about 0.75 per cent, a balanced budget net of once-off items would be in prospect for 2017. That would be one year ahead of the deadline the Government set itself last spring.

Moreover, the achievement of that target would open up the prospect of a boost to expenditure on investment and services. “For the first time, then, money we’re using now to reduce the deficit will be freed up for investment,” Noonan said.

Although critics have charged that the Government’s recent capital investment plan is far too modest in its scope, the Minister said an opportunity may be emerging to boost the plan after a two-year review. Take note that construction of the Metro North project in Dublin – the biggest item in the capital plan – is not due to start until 2021. Completion is not expected until 2027.

The Government may well have its sights on bringing that project or others forward. First up, however, is the hurdle of the election. These figures reflect the restoration of order in the public finances. At issue in in coming weeks is whether voters buy the argument.