Taxes fell below Government expectations for the first time in almost four years in May, as the slowdown in the property market bit into stamp duty revenues.
One financial institution warned that the Government may now miss its full-year target as the European Central Bank prepares to put a further brake on the property market today. It is expected to announce another quarter of a percentage point increase in interest rates.
The Government received some €18,603 million in the year to May, according to the latest monthly exchequer returns data. Although higher than a year before, the figure is € 19 million lower than predicted by the Department of Finance at the start of the year.
The main area of disappointment was stamp duty, where revenues fell below expectations for the first time since 2003. Stamp duty revenues in May were €262 million, €147 million below target and 9.6 per cent down on the €290 million received in May 2006.
Growth rates for excise duties, capital gains tax, capital acquisitions tax, customs duties and income tax have now fallen below expectations for at least four of the last five months.
Growth in VAT receipts has been broadly in line with expectations. Only corporation taxes performed strongly above target, exceeding expectations for the period by €221 million.
Rossa White, an economist with Davy Stockbrokers, cautioned that the Government might not meet its full-year targets for taxes. "Tax revenue from property - stamp duty, VAT and Capital Gains Tax - will hold up reasonably well this year due to the strength of commercial property - but not enough to prevent the Government missing its 2007 forecast," he said.
Mr White said capital spending by the Government was up 85 per cent year-on-year, with much of the money unspent last year now being released. "This is good news, as it helps sustain activity in the building sector," he said
Alan McQuaid, economist with Bloxham Stockbrokers, took the opposite view. He said that despite signs of a slowdown in the housing market, stamp duty revenues had held up reasonably well.
"This is because most of the money coming into the exchequer from stamp duty on housing is from the top end of the market, and this area appears to have so far come through relatively unscathed from the 'softening' in the property sector," he said.
"Looking at the overall tax picture, we still think the continued underlying strength of the economy this year, boosted by €10 billion in maturing SSIA funds, should ensure that total tax receipts in 2007 will again be well ahead of official projections," he said.