Exchequer deficit widens to €7.3 billion in April

FURTHER WEAKENING in tax revenues saw the exchequer deficit widen to €7.3 billion in April, according to data published yesterday by the Department of Finance.

Tax revenues collected in the first four months of 2009 came in almost 24 per cent lower on the same period last year, and total spending increased 3 per cent as rising unemployment put pressure on social welfare spending.

Capital spending by the Government in the year to date has fallen 14.4 per cent, but current expenditure increased 4.5 per cent.

The Government collected €10.1 billion in tax receipts in January-April compared to €13.3 billion in the first four months of 2008.

Revenues from all categories of tax continues to lag behind the figures of a year ago. The pace of decline in tax revenues deteriorated, but only slightly, with the yield in the first four months down 23.9 per cent compared to last year. At the end of March, tax revenues were 23.4 per cent lower than the first quarter of 2008.

There were few bright spots in the data, but Davy Research economist Rossa White said income tax receipts had “held up quite well”, which may indicate that self-assessed taxpayers made early payment of tax ahead of April’s supplementary Budget.

Income tax has slipped 6 per cent behind 2008, with receipts €243 million lower despite the additional yield from the income tax levy announced in the October budget. The impact of the increased levies in the emergency April Budget will be reflected from the May public finances onwards.

However, Mr White said it was “disappointingly short-sighted” on the part of the Government to slash capital spending while not properly tackling current spending.

A dramatic fall in consumer spending led to a 21 per cent decline in VAT receipts, which are now running more than €1 billion lower than last year.

In percentage terms, the housing and investment-related taxes continue to suffer the most, with capital gains tax down 69 per cent or €405 million on last year and stamp duty receipts coming in 64 per cent or €433 million lower.

Excise duties are almost 30 per cent or €562 million behind 2008’s yield, while corporation tax is running 45 per cent or €443 million behind 2008’s yield.

Labour Party finance spokeswoman Joan Burton said the €7.3 billion deficit continued the trend of “appalling economic news”, with the data heaping “yet more misery on an increasingly shaky Government”.

Ms Burton said job losses were the key to the loss of public revenue. “If these figures are to be improved there has to be a sustained effort to protect and retain jobs and to encourage job creation.”

Fine Gael finance spokesman Richard Bruton said the Irish economy was now “teetering on the precipice of a potentially fatal deflationary spiral”.

The Economic and Social Research Institute forecasts that Ireland’s unemployment rate will be 16.8 per cent on average in 2010. It is currently estimated at 11.4 per cent.