Pat McArdle, Chief Economist of Ulster Bank Photo: www.irishconstruction.com

October was another good month. The Government expected to collect €3.2 billion in revenue but got €3.4 billion, i.e. an overshoot of just under €200 million. This was below par - the average monthly overshoot in the nine months to Oct (we ignore January because the Dept fixed the figs for that month) was €222 million. If revenue continues to overshoot at this pace, the cumulative overshoot will be €2.4 billion, not the €2.2 billion that the Minister predicted in mid-Oct when he unveiled his new pre-Budget Outlook for 2007.

In fact, there is a good chance that the overshoot will be substantially greater than €2.4 billion. About a quarter of all tax revenue comes in in the last two months as the self-employed file and pay. While many will have slaved to meet the end-October filing date, they will usually have dated the cheque 31 Oct with the result that it is not booked by Revenue until early November. If they used ROS, they do not have to pay until mid-November. This means that Nov is by far the most important tax month in the year. This year, the Exchequer will receive more than €2.5 billion Corporation Tax, €2 billion Income Tax and €1.1 billion CGT.

The scope for surprises is enormous and the Dept naturally errs on the side of caution - nothing unusual here, all budget controllers do the same. The difference in the private sector is that they are not allowed get away with it to the same extent as their superior's bonus, if not his/her job, is usually riding on it. Anyway, my best guess is that the eventual overshoot (and we will not know the answer until early January when the Budget will be over and the turkey by then cold) could be as high as €2.8 billion, not the €2.2 billion contained in the recent pre-Budget Outlook. When you allow for underspends on both current and capital spending, well nigh inevitable at this late stage (though not accepted by the spending Departments which continue to insist that they will spend their allocation) plus privatisation receipts, the original €2.9 billion EBR will be more that wiped out. This year is likely to see the largest Exchequer surplus since 2001 when it was €652 million.

The big performers in Oct were Capital Gains Tax and Stamp Duties which overshot by €118 million and €149 million, respectively. Given that Stamp Duties are paid on settlement, i.e. reasonably promptly, there is not much sign of a housing slowdown in these figures. Instead, the indicate that activity continues at a steady high level.

Together, they account for €1.2 billion or 55% of the cumulative overshoot. Income Tax has been doing slightly better of late but is still way below where it should be if the national wage and employment trends were to be believed. Year-to-date, it is now almost €150 million above target. Corporation Tax and VAT each had a poor Oct, falling behind target by €107 million and €57 million, respectively. Still no sign of a "debt-fuelled consumer binge". Corporation Tax is still ahead of target overall but has fallen off quite a bit in recent months. The boom continues to be somewhat lop-sided.