Tax returns below target despite new social charge
THE State's finances are doing slightly worse than expected despite the new and unpopular Universal Social Charge, new Exchequer figures reveal.
The Government had hoped the levy would boost the amount of income tax collected by the Exchequer.
But while the gap between the State's income and outgoings narrowed slightly in the first two months of the year, it was not enough to meet official targets, according to figures published yesterday.
Both Fine Gael and Labour declined to comment on the new figures last night as their negotiators continued to hold talks on the policies and complexion of the next Government.
The country spent €1.95bn more than it took in during the first two months of the year as the State extracted less money than expected from individuals and companies.
The amount of income tax paid in February jumped 25pc compared with the same month last year as the Universal Social Charge began to bite.
Despite this, income tax came in below target as the Government had expected to earn even more money from PAYE workers.
Total tax revenues rose 2.2pc to €4.84bn in the two-month period but this was still 2.6pc below target.
Income tax receipts were 2.2pc below target while VAT, company tax and stamp duty also disappointed.
One of the few silver linings for the Department of Finance was excise duty, which was 18pc above target, and revenue from taxes on wills and gifts, which was a third higher than expected.
On the spending side, expenditure on buildings, roads and other capital projects was down 52.4pc year-on-year, while spending on salaries and other day-to-day expenditure was up €221m or 3.4pc.
Economist Alan McQuaid from Bloxham Stockbrokers says it "remains to be seen" whether Ireland can meet the targets set out in December's Budget.
He added: "Although a lot of uncertainty remains about the likely performance of the Irish economy in 2011, we remain optimistic that, notwithstanding the recent surge in oil prices, a solid and sustainable global recovery can be achieved this year, boosting Ireland's export sector and economic prospects in the process."
Whether taxes will begin to generate more revenue for the State depends on many factors, including oil prices and consumer confidence.
Economists are not optimistic. NCB Stockbrokers economist Brian Devine said that tax revenue would be €500m less than the official forecast in 2011.