The improving health of the public finances is reflected in the latest exchequer numbers, which show tax receipts running close to €800 million ahead of target.

The figures show the Government collected €18.8 billion in tax revenue during the first five months of the year, an increase of €1.5 billion on the same period last year, and some €774 million ahead of predictions.

Corporation tax, which surged to record levels last year, remained the largest contributor, coming in at €1.18 billion, some €484 million or 41 per cent ahead of profile.

However, the Department of Finance warned that more than half of the excess was down to overpayment, which would be clawed back by companies later in the year.

The other strong-performing tax head was excise duty, which amounted to €2.3 billion for the period, some €338 million ahead of projections and €625 million ahead of last year’s total at this stage. The performance was linked to continuing growth in car sales.

Income tax, the biggest revenue draw for the Government, came in at €7.4 billion for the period, representing a year-on-year increase of €399 million or 5.7 per cent.

This was consistment with the recovering labour market and solid employment growth, as evidenced in the latest Quarterly National Household Survey and recent unemployment data.

VAT, a key indicator of health in the retail sector, generated €6.1 billion, which was €120 million below profile.

However, the monthly return for May, which is typically the second strongest month, was €44 million ahead of target.

The worse-than-expected VAT returns for the period up to May had led some to conclude that recovery in the sector was not as strong as previously suggested.

The latest returns resulted in an exchequer deficit for the period of €125 million compared to a surplus of €641 million for the same period last year, albeit last year’s figures were flattered by a €2.1 billion payment generated from the sale of Permanent TSB shares, and a transfer from the national pension reserve fund.

Excluding these once-off transactions, the deficit reveals an underlying improvement of €1.38 billion, driven by the extra €1.5 billion in tax revenue.

As a result, the underlying deficit is likely to be less than 1 per cent by the year’s end.

Total expenditure for the period was €16.9 billion, €137 million below projections. Health was the only department to breach its spending target, coming in 2 per cent or €113 million ahead of profile. The 15 other Government departments were all on and inside the targets set out for them.

Capital spending for the period, which covers the State’s outlay on infrastructure, amounted to €916 million, which was €37 million below profile, but €104 million higher when compared to same period last year.

The cost of servicing the national debt for the first five months of the year was €3.39 billion, representing a year-on-year increase of €42 million or 1.3 per cent.

This is largely the result of the first full-year coupons on the 2030 and 2045 bonds issued in late 2014 and early 2015 respectively. These were offset to a large extent by lower payments on IMF loans, however.

“Ireland’s strategy in recent years has been to under-promise and over-deliver on the budgetary front, one which has been very successful in helping bring Irish government bond yields down to record-low levels. As long as the minority government sticks to this strategy then market funding costs should remain low,” said Alan McQuaid of Merrion Stockbrokers.