TAX REVENUES collected by the Government up to the end of July are €575 million lower than the Department of Finance expected a little over three months ago, putting pressure on the Government’s tax targets for 2009.
The shortfall in tax receipts has trebled over the last month, according to figures published by the department yesterday. If this trend continues, the Government will be unable to meet its projection of €34.4 billion in tax revenues this year.
The exchequer deficit grew to €16.4 billion at the end of July, compared with €14.7 billion at the end of June. The deficit, which is almost €10 billion higher than it was this time last year, includes €6 billion in payments to bail out the banks.
The latest exchequer returns point to further weakness in the economy, led by a decline in consumer spending. The gap between the projected and actual level of VAT returns, an indicator of economic consumption, widened to €448 million and accounted for most of the shortfall.
The subdued state of the labour market was reflected in a worsening shortfall in income tax receipts, which are €185 million behind the Government’s targets.
Receipts from corporation tax were barely positive in July at just €5 million, as repayments to companies that overpaid on their preliminary corporation tax or were due tax credits almost cancelled out new revenues.
Capital gains tax revenues are less than a third of what they were at the same stage in 2008, while the stamp duty yield has dropped 64 per cent since last July, when it was already at a low base.
Confidence in the ability of the Fianna Fáil-led Government to rescue the economy is plummeting along with the tax take, according to Fine Gael deputy finance spokesman Kieran O’Donnell.
“There is still no sign of any green shoots in the latest exchequer figures, and no sign that the public finances are stabilising,” said Mr O’Donnell, who said there was now a complete lack of confidence in the way Fianna Fáil was running the country.
Davy Research economist Rossa White yesterday predicted that tax revenues for the year would be “closer to €33 billion”, more than €1 billion less than the Government’s latest projections.
Further slippage in tax receipts will require the Government to add to an already swelling debt burden in order to finance the running of the State. So far this year, the Government has borrowed €25 billion, while interest payments on servicing the national debt have increased to €1.9 billion, up 33 per cent on 2008.
The data for Government expenditure shows that spending on the day-to-day running of the State is broadly in line with Government targets, but is up 2.6 per cent on the same period in 2008. Capital spending is down 11 per cent on last year.