The rapid economic downturn in 2001 has left a gaping hole in the Government’s finances. Tax receipts in 2001 have fallen €2.5 billion short of forecasts, according to figures released today by the Department of Finance.
Although today’s end of year figures show the Exchequer is €316 million better off than the estimate made by the Department in early December, they confirm the economy slowed dramatically in the second half of the year.
The Exchequer Surplus in 2001 was €650 million compared to €3.18 billion in the year 2000, mainly due to a sharp drop in tax revenue. The shortfall was spread across all tax categories with VAT, excise duty and income tax the worst hit.
VAT receipts for the year €871 million below target and income tax receipts were €532 less than forecast.
Officials at the Department of Finance were at a loss to explain the dramatic shortfall in tax receipts but said that the economic slowdown was the most probable reason.
They suggested that cutbacks in overtime which is mainly taxed at the top rate was a contributing factor to the fall in the income tax take. But when asked to give a more concrete explanation one Department official said "We’re guessing, you’re guessing, we’re all guessing."
While tax revenue has fallen short current Government spending in 2001 rose by 22 per cent slightly above previous forecasts of 21 per cent.
The Department pointed out that Ireland’s debt to GDP ratio of 34 per cent was still the second lowest in Europe and well within the ECB’s guidelines for membership of the euro zone.