THE GOVERNMENT collected slightly more tax than it had expected last month, in a further sign that the Irish economy is stabilising, according to the latest exchequer returns data published yesterday.
After a poor July, tax receipts in August were about €150 million better than expected for the month.
However, in the year to date, tax revenues are still substantially lower than the targets issued by the Department of Finance.
The Government has collected almost €20.8 billion in tax over the first eight months of 2009 – some €427 million or 2 per cent below projections made at the end of April.
On an annual basis, tax receipts are down 16.1 per cent, or €4 billion, on the first eight months of 2008.
There was no further deterioration in August and better-than-expected returns from corporation tax meant it was able to reduce the shortfall, which stood at €575 million, or 3 per cent behind target, at the end of July.
However, income tax fared less well last month and is now €263 million or 3.5 per cent behind target.
The latest returns will not prompt a change in Government strategy, a spokesman for Finance Minister Brian Lenihan said last night.
“The Government is determined to implement the budgetary strategy so as to protect our economy and its jobs,” he said.
Fine Gael deputy leader Richard Bruton said the figures confirmed that there would be serious consequences for taxpayers in the next budget.
He accused the Government of “sleepwalking” into a budget of tax hikes and cutbacks on essential services.
Mr Bruton added that the year-on-year drop in the tax take was “evidence that the Government got it seriously wrong in concentrating on huge tax increases to correct the public finances”.
Citing the poor income tax receipts, Labour Party deputy leader Joan Burton said it was “clear that closing the public finance chasm can only happen when we get Ireland back working”.
The exchequer deficit widened to €18.7 billion in August and remains more than double the size of the deficit that existed a year ago.
Total expenditure by the Government in the year to date stands at €30.7 billion. The figures show that the Government has drastically cut capital spending, which is now running 14.6 per cent, or €671 million, lower than at the same point last year.
Current spending – spending on the day-to-day running of the State – is up 1.6 per cent or €422 million on the same period last year. This is largely due to a 13 per cent year-on-year rise in spending by the Department of Social and Family Affairs following a dramatic spike in unemployment.
However, there were tentative signs that a sooner-than-expected bottoming out in the labour market is also helping to bring social welfare expenditure under control. Spending by the department so far in 2009 is lower than estimates made at the end of April.
Corporation tax and excise duty are the two categories of tax that are performing ahead of the Government’s targets.
However, Ibec economist Fergal O’Brien said the buoyant performance of corporation tax, which has generated an extra €697 million for the Government compared to last year, was largely a result of changes to the payment calendar for the tax, “rather than a reflection of any improvement in trading conditions”.
