The exchequer budget deficit at the end of 2005 was just €499 million as opposed to a shortfall of €3 billion which was expected by the Department of Finance at the beginning of last year.
The improved financial situation was largely due to tax receipts €1.75 billion above estimates. The continued property boom was largely repsonsible for the increase with stamp duty and capital taxes accounting for 60 per cent of the surplus.
Mr Philip Hammell, Head of the Department of Finance's Finance Directorate, said there was also signs of strong consumer demand at work in the economy.
Excise duty was €158 million over expectations largely due to contributions from taxes on vehicles and tobacco products.
Government expenditure was up on 2004 by 9 per cent but was still €705 million less than expected.
Factors such as fewer people on the live register and reduced spending on disease spending by the Department of Agriculture contributed to a saving of €564 million on current expenditure.
The shortfall in budgeted capital expenditure of €141 million was largely a matter of timing according to Hammell and €346 million of capital from 2005 will carry off to nexy year as part of the new multi-annual spending envelopes introduced by the current Government.
"2005 was a good year in terms of the economy and public finances, with growth of four to five per cent and a balanced fiscal position," said Minister for Finance Brian Cowen.
"The big story was the increase in employment - 96,000 or five per cent as of Q3 2005 versus Q3 2004."
Despite the increase in the numbers at work, income tax was just €161 million above estimates, including a contribution of €511 million from once-off special investigations by the Revenue Commissioners.
Finance officials said this was because new employment does not yield as much tax revenue as existing employment as workers are usually on lower wages.
Officials also defended the fact that the actual exchequer figures were significantly better than those budgeted for.
"In line with with other commentators we anticipated an easing of the property market and it didn't happen," said Mr Hamell. "Estimates of spending by individuals we don't control - that's a free society. Where we do control spending, our estimates have generally been pretty good."
Labour Party Finance Spokesperson Joan Burton slammed the Minister for Finance for getting "his sums wrong".
"This is the third year in a row that the Government's finances have been out by billions of euro," said Ms Burton. "By any standards, this degree of error must raise questions about the validity of the budgetary process."
The ratio of General Government Debt to Gross Domestic Product (GRP) now stands at 27.8 per cent which Hamell said is one of the lowest rates for any European economy.