Tax revenue more than €4 billion behind target

Public finances deteriorated further in October, with the exchequer deficit worsening to €11 billion, the latest figures from the Department of Finance show.

As the economy sinks further into recession, tax revenues collected by the Government for the first 10 months of 2008 are almost 12 per cent behind projections made at the start of the year.

The exchequer returns data for October shows that the Government has received total tax receipts of €31.4 billion compared to the €35.7 billion that it had been expecting.

The exchequer deficit, which stood at €9.4 billion at the end of September, has now worsened to €11 billion. This compares with a deficit of €3.9 billion this time last year.

Fine Gael deputy leader Richard Bruton said the impression that the Budget would bring the public finances under control was now a “complete illusion”

“The Taoiseach revealed in the Dáil today under questioning from Enda Kenny that the Government was planning tax increases or spending cuts of at least €5,000 million in Budget 2010,” Mr Bruton said after the Exchequer figures were published.

He said it was “extraordinary” the Government signed up to public sector pay increases in the past 6 months that will cost the taxpayer €2 billion, “in the full knowledge that massive spending cuts or tax increases are going to have to be made.”

Alan McQuaid, economist at stockbrokers Bloxham, said the Government would have difficulty meeting its recently revised Exchequer deficit for 2008 of €11.5 billion. Mr MrQuaid also warned that the Department of Finance's current estimate of a €6.5 billion shortfall on tax revenue for the year "may be optimistic the way things are going".

The picture for public finances "continues to deteriorate sharply despite the fact that October is a big payment month for corporation tax".

Following the collapse of the housing market and a slowdown in consumer spending, VAT is the category of tax that is running the most behind target, coming in more than €1.6 billion short of start-of-year expectations. Stamp duty, capital gains tax and corporation tax are all substantially behind target.

The exchequer returns data for November are now crucial for the economy, as this month is an important one for the collection of VAT, income tax and corporation tax.