Income tax take €50m over target last month
THE GOVERNMENT collected more tax in November than it had anticipated just a couple of months ago, according to figures published yesterday by the Department of Finance.
The exchequer returns show that income tax receipts came in €50 million ahead of expectations during the month of November alone, although for the year as a whole income tax receipts are still €575 million or 5 per cent behind targets set by the Government in April.
Total tax revenues slipped by a further €285 million last month – largely due to weak receipts from VAT – and are now almost €1.36 billion behind the April targets.
However, the picture for tax revenues has improved since the Department of Finance indicated in October that the tax shortfall would exacerbate to at least €2 billion by the end of the year.
Minister for Finance Brian Lenihan said the figures served to vindicate the Government’s fiscal strategy, although he said spending cuts of €4 billion would still be required in the budget.
“The one good news stemming from the exchequer returns today is that our borrowing has not escalated to 12.5 per cent [of GDP] as we had anticipated it would this year,” he said in Brussels.
“On the basis of the tax receipts and on the basis of the control that we have maintained over expenditures this year – and it’s now 11 months into the year – I would anticipate that the deficit will be less than 12 per cent this year.”
The Minister said the downward trend should give some “some confidence” to international bond markets because the Irish deficit this year would be superior to that of Britain and Greece.
“The reality is we took those decisions to stabilise the debt and stabilisation is now appearing for the Irish economy,” he said.
However, Fine Gael finance spokesman Richard Bruton said the latest exchequer data showed that the Government’s strategy for the budget was falling apart.
“You don’t need to be Einstein to know that Ireland has got to trade its way out of this recession,” Mr Bruton said, criticising the Government’s proposed expenditure cuts and tax increases.
Labour Party spokeswoman Joan Burton said the collapse in VAT and excise duties was part of a broader collapse in consumer confidence.
“Consumers are responding to a Government that has no action plan for jobs and keeping their hands in their pockets,” she said.
Chartered Accountants Ireland said the income tax figures showed that the worst fears of a meltdown in the self-employed sector had been avoided.
“While the income tax figures are down, and down considerably on previous years, they are not as poor as some had feared,” said its director of taxation Brian Keegan.
But he added that it was critical that the self-employed sector was “supported as far as possible” in the budget, while the weak VAT receipts added to the case for a stimulus to consumer activity in the form of a cut in VAT.
VAT fell a further €138 million behind the April targets during November. This category of tax is now running 20.5 per cent behind the receipts received in the same period last year.
Corporation tax is running 3.3 per cent ahead of expectations, but is still down 25 per cent on last year’s receipts.
Overall tax receipts are running almost 21 per cent behind last year’s performance, having deteriorated from a 17.1 per cent year-on-year decline recorded in October.
Income tax receipts have held up better than most other categories of tax and are down 10 per cent on last year.
The exchequer deficit now stands at more than €22 billion. This compares to a deficit of almost €7.9 billion this time last year.