Income tax take is €270m short of budget target
THE Government's tax revenues are starting to move closer to budgetary targets set by Finance Minister Brian Lenihan as corporation tax and VAT receipts improve.
Yesterday's Exchequer returns showed that tax to the end of August is now just 0.7pc below the target set in the Budget in December. However, it is down 9pc when measured against the tax take this time last year.
The main drag on the figures remains income tax, which is strongly linked to high unemployment.
The total tax take was €18.9bn, but income tax came in €270m below targets.
The amount of tax collected to the end of August is €141m below the forecast given in the minister's budget speech. But corporation tax is 4.3pc ahead of the target, with VAT 0.7pc ahead. Income tax was 3.9pc below the target.
In July the tax returns were 1.4pc below target, but in August the gap narrowed. Economists last night said the latest figures showed the Government's tax forecasts were broadly on track.
"A number of recent releases have suggested a faltering recovery, so the relatively brighter picture from the Exchequer is welcome news," said Aidan Corcoran, an economist with Davy Stockbrokers.
The Government's budget deficit currently stands at €12bn, down from €18.7bn this time last year. Capital spending is 23.6pc below where the Budget expected it to be, with only €2.5bn spent so far on infrastructural projects.
But the Department of Finance claimed this was down to "timing and operational issues".
"It is anticipated that capital expenditure will pick up over the remainder of the year," it said in a statement.
IBEC last night said it was concerned at the lower capital spending.
Mr Lenihan last night claimed the early signs of growth could be seen in the Exchequer figures. The jobless figures were a "big problem" and the country was heading towards a peak in unemployment, the minister conceded.
"The early signs of growth are there. It is slow. It is sluggish. I accept that, but it's on the way and it will continue," Mr Lenihan said.
Fine Gael's finance spokesman Michael Noonan claimed there was no sign of recovery in last night's Exchequer figures.
The tax take for the year to August is 9pc below the same period last year and income taxes are still €270m behind target -- reflecting the weak jobs market, shorter working hours and surge in unemployment since April, he said.
Labour's finance spokeswoman Joan Burton said the figures showed no signs of recovery, with tax receipts remaining "extraordinarily weak".
Following repeated claims by Mr Lenihan that the economy has stabilised, Ms Burton said the minister was "dangerously in denial".