Ireland expects to have cut its budget deficit for 2015 to close to 1.5 percent of gross domestic product (GDP) and to balance the budget a year ahead of schedule in 2017 thanks to a booming economy and surging tax revenues.
The government last month trimmed its forecast for the 2015 deficit last month to 1.7 percent of GDP from 2.1 percent but cut it again on Tuesday after 3.3 billion euros, or 7.8 percent, more tax was collected than expected in 2015.
"The figures today are truly remarkable and underscoring of the incredible journey we've taken over the last five years," spending minister Brendan Howlin told a news conference in a pitch to voters ahead of a parliamentary election expected next month.
Including one-off items, primarily the unwinding of a costly bank bailout, the government cut its budget gap in cash terms to 62 million euros at year-end from 8.2 billion in 2014.
Without items such as December's recouping of 1.6 billion euros from state-owned Allied Irish Banks, the deficit would have been around 3 billion euros, the finance department said.
However, with Ireland's economy set to be the fastest growing in the EU for a third straight year in 2016, Goodbody Stockbrokers forecast that the deficit might be eliminated this year.
While income tax and excise duty rose sharply in December, corporation tax accounted for 70 percent of the year's surplus and at 6.9 billion euros, exceeded the annual peak of 6.7 billion collected in 2006 before Ireland's financial crisis led the state into a three-year international bailout in 2010.
Tax collectors say the rise in corporate tax is sustainable but after collecting 50 percent more from firms than expected in 2015, the finance department said it had conservatively forecast a fall back to 6.6 billion euros this year.
"Corporation tax is not a big tax head, it's about 15 percent of the tax take so if there's a slight variation, it's not a make-or-break situation," Noonan said, adding that he would not be surprised if the overall tax-take trumped expectations again this year.
Government spending for the year was 2.8 percent, or 1.2 billion euros, higher than expected. Spending was under budget for the first 11 months, but the government committed in October to divert 1.5 billion euros of the tax windfall into additional spending before the end of the year. (Reuters)
Source: www.businessworld.ie
