A sluggish property market and poor consumer spending before Christmas dragged down the amount of tax collected by the Government in the first month of the year, new figures show.
The €4.6 billion in tax received by the Exchequer in January was €135 million, 3 per cent lower than it was in the same month of 2007. The lower tax yields reflect growing concerns that the Irish economy will be subdued in 2008.
There was a €65 million shortfall in VAT receipts, which economists said was the result of the ailing housing market and a poor start to the Christmas shopping season for retailers. The €180 million yield from stamp duty, another property-related tax, was half the sum received the previous January, while capital gains tax yields also plunged.
The overall amount of tax collected was higher than the Department of Finance's own projections, as the value of income tax receipts increased 9 per cent to €1.2 billion. This surprise boost in income tax paints a healthier picture of the employment market than was suggested by January's sharp increase in the number of people claiming unemployment benefits.
But Goodbody economist Dermot O'Leary said recent tax trends were further evidence that the Government was unlikely to hit its forecast of 2.8 per cent economic growth this year.
Alan McQuaid, economist at stockbrokers Bloxham, said the "disappointing" VAT figures didn't augur well for the rest of 2008, but he added that it was still too early to say if the Government will meet its target of a 3.3 per cent increase in tax revenue.
"Given recent global developments, one would have to say that the target is more likely to be undershot than overshot."
However, an "encouraging" 4 per cent increase in new car sales in January helped excise duty yields to climb 1.2 per cent and suggests that Irish consumers will prove more resilient to an economic slump than their counterparts in the UK and the US.
Opposition politicians yesterday accused Minister for Finance Brian Cowen of mismanaging public finances.
Fine Gael finance spokesman Richard Bruton said the exchequer figures confirmed that a "pre-election spree" and "ongoing bungling" had done serious damage to the economy, while Labour finance spokeswoman Joan Burton said Mr Cowen's handling of stamp duty reform had "utterly failed".
The exchequer surplus was €630 million in January, compared to almost €1.7 billion in January 2007. The Government plans to run a deficit of €4.8 billion this year, as it spends more money on the National Development Plan.
