No wiggle room as tax take comes in lower than expected
FINANCE Minister Michael Noonan won't have any wiggle room as he tweaks next week's Budget following the publication of new figures that showed that income tax, VAT and corporation tax are all generating less money for the State than expected.
Despite the disappointing tax returns, the Department of Finance said last night that it still expected to meet its targets for 2011 because spending would also be lower than projected.
This means that the IMF, the ECB and the European Commission are likely to be happy with this year's performance but it suggests that Mr Noonan will have to make further cuts to spending on roads and other projects in the Budget to keep things on track next year.
"If controlling the Budget deficit is the main objective, then cutting expenditure is the best way to approach this," said Alan McQuaid of Bloxham Stockbrokers.
Many economists believe most of the eurozone will slip back into recession next year and yesterday's exchequer returns are a further sign that the economy here is also slowing after expanding in the first half of the year.
Despite all the austerity measures endured over the past 12 months, the overall deficit at the end of November stood at €21.4bn, compared with a deficit of €13.4bn in the first 11 months of 2010.
The massive €8bn increase was mainly due to the €10.6bn pumped into the banking sector in various rescue measures.
Excluding those banking-related payments and a €1bn bonus to the State after the sale of some Bank of Ireland shares, the Exchequer deficit fell by about €1.6bn year-on-year.
The total amount of tax collected in the first 11 months of the year stood at €31.8bn, which is 7.9pc more than in the same period last year.
The main reason for the increase was the introduction of the Universal Social Charge.
Stamp duties surged 52pc following the Government's controversial levy on pension funds to pay for job measures in a mini Budget following the general election.
A further sign that companies are also struggling was the fall in corporation tax, which is now 6.3pc off target.
Many self-assessed employees pay their tax in November and the Government had hoped for a €5.5bn boost last month. In the end, it got €337m less than projected in November, bringing the annual shortfall to €520m.
VAT has come in below expectations for the past six months as consumers rein in spending.
Following a larger-than-usual shortfall on €147m in November, the total VAT take is now €464m or 4.6pc below target.
A bright spot for the Government was excise duties, which came in 0.4pc above target.
Meanwhile, confidence levels among consumers dipped just slightly last month as homeowners hold out for mortgage relief.
People remain cautious and are cash strapped, but are holding out hope that there will be a series of European Central Bank interest-rate cuts.
The prospect of rate reductions ensured that the decrease in sentiment among consumers last month was only slight.
Economists said the dip was not unexpected after the exceptional rise seen in October.
The sentiment index fell to 60.1 in November after hitting a 16-month high of 63.7 the previous month, according to the KBC Bank/ESRI consumer sentiment index.
This compares with a reading as low as 48.4 in November 2010 and an average reading of 55.4 for the past 12 months.