However, adjusting for the impact of housing booms or asset bubbles on tax revenue is not straightforward and is not something that was explicitly corrected for either in Ireland or elsewhere at that time. By not taking account of this effect, however, the underlying health of the fiscal position is overstated and its vulnerability to the cycle is understated.
In Ireland’s case, given the scale of the housing boom, this was a significant factor. Estimates suggest (Addison-Smyth and McQuinn, 2010) that the contribution of residential property market taxes to total tax revenue doubled to almost 16 per cent between 2002 and 2006 (Chart 4).