Brian Cowen (Laois-Offaly, Fianna Fail)

The expected surplus in tax revenues in 2005 was recently estimated at €1.8 billion or 4.8%. At the end of November total tax revenues were €36,879 million, which was €1,722 million or 4.9% ahead of profile. The receipts include €489 million from the main special investigations of the Revenue Commissioners, which was €294 million higher than expected for the period. Excluding the impact of these one-off receipts, taxes were 4.1% above profile.

The main excesses were on VAT, stamp duty, capital gains tax and excise. This is due to strong growth in the domestic economy and, in particular, in personal consumption expenditure, the volume growth in which is currently estimated at 5.3% for this year. The continued buoyancy of the property market is also a contributory factor in tax revenues being ahead of target. Income tax, excluding the impact of one-off receipts from Revenue's special investigations, was broadly on target, while corporation tax was close to €300 million below profile.

The methodology for forecasting tax revenues generally is based on forecasts of the level and composition of economic activity, which is determined by many factors and is subject to both national and international shocks. Forecasting economic activity, on which forecasts of tax revenues are largely based, is not, therefore, an exact science. Tax forecasts can also be influenced by factors and considerations other than the general level of economic activity.

One main reason we are receiving more in tax than we had forecast is that our tax and economic policies have put more money into the pockets of taxpayers who are spending and investing this extra money as they see fit. This extra spending and investment yields extra taxes.

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