The Department of Finance has warned that there will be a €500 million shortfall in tax revenues at the end of the year. Such an outcome would significantly increase the Government's borrowing requirement for 2003 and could put serious pressure on the public finances next year.
The projection was made as the latest Exchequer returns revealed that tax receipts in the first six months of the year came in €340 million behind the Revenue Commissioners' expectations for the period.
Commenting on the figures, the Minister for Finance, Mr McCreevy, admitted there was "pressure in a number of areas".
His officials later highlighted weakness in excise receipts, corporation tax and VAT as the main problems facing the public finances.
They indicated, however, that the Department would not seek to make up the shortfall in tax by restricting plans for spending, noting that there were "no proposals for change".
At the end of June, the Exchequer was in deficit by €344 million, down from a deficit of €1.24 billion at the end of May. Last December's Budget was based on a borrowing requirement of €1.87 billion for the year, but if the Department's latest tax forecasts prove accurate, this could now rise well above €2 billion.
The Exchequer returns showed that tax revenue in the first six months was behind target in almost all areas. Income tax receipts, which amounted to €3.8 billion in the first half, were 3.9 per cent, or €115 million, below target, with the self-employed sector blamed for two-thirds of the shortfall.
Excise returns, at €2.1 billion, were 4.7 per cent, or €164 million below target. Corporation tax returns, despite being significantly up on last year, are running 4.8 per cent, or €136 million, behind forecasts. VAT receipts came in just below expectations, but the Department expressed concerns that VAT could weaken in the months ahead.
The only tax source outperforming expectations is stamp duty, which returned €114 million more than had been anticipated for the first half, pushed in the main by a surging house market.
On the spending side, the Government has come in €1.1 billion below its target. Department officials cited timing as a factor in the performance, referring in particular to a delay in making some benchmarking payments.
While the Department had expected €480 million in benchmarking awards to have been paid by the end of June, the actual payments amounted to just €100 million.
Day-to-day spending is slightly ahead of projections, while capital spending is well down, running 13.6 per cent less than last year.
At the start of the year, the Department projected a 1.4 per cent decline in capital spending.
The Minister for Finance welcomed evidence that Departments and officers were managing within their allocations, but warned that he would continue to monitor spending closely.
