Budget plans still on track despite tax take shortfall
THE Government's Budget plans are still on track, despite new Exchequer figures showing a further €266m tax shortfall.
At the end of a week when the Government committed to putting another €32bn into our scandal-hit banks, the Department of Finance reported tax revenue was down 15pc on the same time last year.
Opposition parties last night said the figures showed there was no sign of the economic uplift predicted by the Government.However, the Coalition is still predicting a return to economic growth in the latter part of this year.
The public finances at the end of last month showed tax revenues less than 4pc below the estimates made in last December's Budget.
The €7.24bn collected in the first three months of the year was €266m less than had been anticipated.
But the 3.9pc slippage in quarterly figure for income tax -- seen as a better guide to trends than the monthly ones -- compares with a 5.9pc slippage at the end of February.
The surprisingly strong performance of VAT revenues in February was not repeated. But the €3.2bn raised was just €54m short of the target for the three months -- as near as makes no difference.
Finance Minister Brian Lenihan said the deficit at the end of March of €3.9bn was "generally in line with expectations for this point of the year.
"Tax and expenditure performance to date are broadly in line with my Budget plan. My Department continues to analyse the emerging trends and at this stage of the year I have no reason to change my outlook," he said in a statement.
But Fine Gael claimed the tax take would be short €1bn by the end of the year if the trend continued.
Department of Finance officials said it was too early to change their estimates for tax revenues of €31bn this year -- €3bn less than the amount collected in 2009. "We expect revenues to pick up later in the year," said Assistant Secretary Michael McGrath. "The target is still valid."
The Budget estimates are based on the economy shrinking by a further 1.25pc this year, with a bigger decline in the first six months being partially offset by growth in the second half. Some economists are now predicting a smaller decline -- if any -- in 2010. That could even mean the Budget coming in ahead of target.
But the difference would be too small to have any impact on the planned €3bn in tax rises and spending cuts in next December's Budget. The figures also show total spending was 2pc lower than the projected €10.7bn.
Capital spending of €1bn was 10pc below estimates but officials expect both current and capital spending to catch up with targets during the year.
Interest payments on the national debt in the first quarter of this year were more than €733m, compared with just under €300m a year earlier, reflecting the borrowing of more than €20bn last year. Total interest costs this year are put at €4.5bn, as another €19bn is borrowed.
There may be some small savings on this cost this year, according to Mr Lenihan.The premium, or spread, over Germany which Ireland pays on its borrowings is now about half the rate it was this time last year," he said.
Fine Gael finance spokesman Richard Bruton said Mr Lenihan's hope the economy has turned a corner was not borne out by the figures.
"It confirms the picture there is no turnaround in the economy and our view the private sector is in a cycle of saving. You need a broader economic strategy than retrenchment and putting money into the banks," he said.
The Labour Party described the figures as "grim". Finance spokesperson Joan Burton said they show the specific interest cost on the borrowed money for the banking system while the income tax figures were alarming.