After a slight dip in April, the figures for May show a return to the impressive exchequer figures that we have seen over the past couple of years.
Of particular note is strong VAT receipts, reflecting the increase in consumer confidence levels and indicating that the slight dip in the previous month was a one off event.
As expected, strong employment figures are reflected in robust income tax receipts with figures well ahead of last year despite the reduction in income tax rates. This might give the Minister confidence that any further reduction in income tax rates in the budget later this year will not result in any fall in income tax receipts in 2016. Lower income tax rates mean greater disposable income and should lead to a further boost in economic activity next year.
In the background, the ongoing debate about the common EU tax base rumbles on. In our view, this poses little threat for Ireland given our transparent tax regime. A more draconian measure being suggested is the concept of a consolidated tax base across Europe which poses a far greater threat for a small economy like Ireland. However, in our view, the chances of such a measure being successfully implemented are remote at this point.