With today's budget the last before the general election in 2007, some analysts speculate that the minister will bring about a 1% cut in Ireland's top rate of income tax to 41% and relief for home buyers who are facing higher purchase taxes as house prices continue to rise.

In the year to the end of November 2006, the Exchequer received just under EUR43.1 billion in tax revenues, up from EUR36.9 billion in the comparable period in 2005. The largest contributors to the government's coffers were value-added tax at EUR13 billion (up from EUR11.7 billion in 2005) and income tax at EUR11.5 billion (EUR10.5 billion in 2005).

Ireland's booming housing market, which shows little sign of abating anytime soon, meant that the stamp duty take was almost EUR1 billion higher in 2006 compared to last year, at EUR3.4 billion. Capital gains tax revenues were also sharply higher at almost EUR3 billion in 2006, more than EUR1 billion up on 2005.

Corporate tax revenues also showed a marked increase, from EUR5.2 billion in the first 11 months of 2005 to over EUR6.5 billion this year, indicating that the wider economy is growing at a healthy pace.

As a result of the new figures, the Irish government is predicting a budget surplus of EUR2 billion next year - in contrast to most EU nations which are tackling substantial deficits - even after a 1% cut in the higher rate of income tax has been accounted for.

However, prudence is likely to remain Cowen's watchword, and it is widely anticipated that any tax cuts will be moderate, as will any increased expenditure on social programmes.