The Government is expecting a shortfall in tax revenue in the region of €500 million by the end of the year, according to the mid-term economic review published this afternoon.
The review also says that the growth in tax receipts for 2002 forecast at budget time to be 8.6 per cent, is now unlikely to be reached as the tax take at the end of July was only 0.7 per cent higher than last year.
Tax receipts this year, the review says, when compared with 2001, were significantly affected by a number of timing factors including the impact of the change to the calendar tax year, and the budget 2002 revenue-yielding changes in Corporation Tax and VAT not enhancing receipts until May and June, respectively.
Income tax, it says, also remains below target although it is expected that as the impact of these factors dissipates, and as the economy continues to recover, the performance of tax receipts will improve.
The review also shows that spending in the first seven months of this year was 21.9 per cent compared with the year-on-year increase in total net voted spending in the first seven months of this year was 21.9 per cent, compared with a Revised Estimates Volume increase of 14.4 per cent for the year as a whole.
"It has been made clear that Government spending will have to be managed within the approved allocation," the review says, "and that spending plans are being closely monitored to ensure that the target is achieved.
The Government, however, expects extra non-tax revenue from Central Bank profits, lower EU Budget contributions, ACC receipts and miscellaneous other receipts, to provide an offset to the decline in revenues and it still expects that there will be a budget surplus at the end of the year.
The General Government Surplus for 2002 is now forecast at around 0.1 per cent of GDP; this estimate reflects the Eurostat decision that the euro-related receipts from the Central Bank should not be included.
The debt to GDP ratio is expected to decline further in 2002, to 34 per cent by end-year.