Tax revenues overshot budgetary forecasts by €1.7 billion for November as the Government's monthly tax take set a new record of €10 billion, Department of Finance figures show. Marc Coleman, Economics Editor, and Mark Hennessyreport
The latest exchequer returns data released yesterday show that November's tax take reached the highest monthly total on record, confirming the Government now has scope for more significant tax cuts and spending increases than previously expected.
But Fine Gael finance spokesman Richard Bruton said the figures proved the Government had engaged in a "tax hike" and said Government finances were now too dependent on the property market.
Government revenues rose by 34 per cent on November 2005, the highest monthly increase this year, bringing total tax revenues in the year to November to €43 billion. This compares with €37 billion for the same period of last year and exceeds budget-time expectations for this period by €3.7 billion.
An estimate of the Government's pre-budgetary financial position published last Friday suggested that the Government would have €2.7 billion more in resources next year than originally expected last October. Compared to that estimate, which forecast revenue to rise by 15.8 per cent this year, the latest exchequer returns show revenue growing by 16.9 per cent in the first 11 months of the year, suggesting a further pre-budget boost to the Government's financial position.
An unexpected surge in capital gains tax in November brought the month's revenue for this category to €1.7 billion, some €650 million higher than expected for the month and over €500 million more than was received in the entire year to October. Corporation taxes also exceeded expectations, by some €456 million, while income taxes and VAT were €327 million and €134 million respectively.
"€10 billion is a lot of money. It equalled, for example, the total tax take in 1990 and was almost two-thirds of the 1996 figure. It was also much greater than anyone, myself included, expected," Ulster Bank chief economist Pat McArdle said yesterday. Mr McArdle said the strong return from capital gains tax was a justification for having a lower tax rate. "The merits of a reasonable, 20 per cent rate become ever clearer," he said.
The latest figures also reveal that Government spending rose by less than expected in the year to November. Compared to a target of 12.7 per cent, total spending rose annually by 11.3 per cent over the 11-month period. Its most recent estimates of spending growth project a rise of just over 9 per cent next year. However, this is expected to rise tomorrow, reflecting additional spending measures to be announced on Budget day.
Bloxham stockbrokers chief economist Alan McQuaid said the new figures meant that higher spending growth would not be incompatible with tax cuts. "The huge amount of surplus funds at the Minister for Finance's disposal suggest that the PAYE sector will see significant tax concessions in Wednesday's Budget, with social welfare increases also likely to be quite generous," Mr McQuaid said yesterday.
Responding to the latest figures, Labour Party finance spokeswoman Joan Burton said the Government should significantly increase the standard rate band, rather than cut the top rate.