Public finances buoyed by July Revenue takings
Income tax receipts 'better than expected'
Income tax receipts for July were "better than expected", a further sign that the public finances are stabilising, it has emerged.
However, the full figures to be announced on Wednesday will show the full Exchequer deficit for the end of year will be €20bn -- which means the country is borrowing €55m a day.
Income tax has been the main concern as tax receipts across the board have been weaker in 2010 than in 2009, and the improved returns in July will be of some comfort to Finance Minister Brian Lenihan, who has been pressed by the Central Bank, the EU and the IMF to provide more specific detail on his tax-and-spend policies.
Figures so far this year show that income tax receipts have been a persistent black spot for the Exchequer, falling 5.8 per cent, or €304m, behind the Department of Finance's expectations in the first half of the year.
Department officials said it was difficult to pinpoint the reasons for the shortfall, but they acknowledged that shorter working hours, lower hourly pay and people moving into the black economy could be contributing factors.
As the month ended yesterday, early indications were that a "marked improvement" in the income tax figures was evident in July. Other taxes remained static and overall the total tax take for the year is still expected to be €31.5bn.
The State took in €14.4bn in taxes over the first six months, which was €227m, or 1.6 per cent, below the department's forecasts. At that stage, the Exchequer deficit stood at €8,887m. That compared to an Exchequer deficit of €14,709m for the first six months of 2009.
For its part, the Central Bank, in its latest quarterly review, said the rise in economic output (GDP) next year would be 2.8pc -- well below the 3.3pc in the Budget calculations. Such a writedown equates to a €300m shortfall in tax receipts next year.
Bank economists urged Mr Lenihan to cover any loss with more tax rises and spending cuts. "We will have to wait to see how things are actually going," the Bank's assistant director general, Maurice McGuire, said last night.
"It is possible that growth will be weaker than the original Budget forecast. Unfortunately, further adjustments will be necessary, if that is the case," Mr McGuire added.
Speaking yesterday, Mr Lenihan refused to bow to calls from the Central Bank, the IMF and the EU to provide more information on his tax-and-spend policies.
"The bank's assessment of the outlook for this year is similar to the Department of Finance's view, published earlier this month," he said.
"The necessary decisions taken by the Government are beginning to bear fruit, and I welcome this. The advice of the bank is noted, especially regarding the need to ensure a normal functioning of the banking sector; consolidate the public finances; and improve the economy's international competitiveness."
The Central Bank was the latest to call on the Government to spell out in more detail how the overall adjustment is to be achieved.
"In order to achieve these targets, it will be necessary to spell out the details of the consolidation measures, implement them without delay and also to stand ready to take further action if needed," the report says.
It argues for any emerging shortfall to be covered.
The bank joins the Economic and Social Research Institute in forecasting growth of less than 3pc next year.
However, its projected 0.8pc rise in GDP this year is much better than the 1.3pc contraction in the original 2010 Budget figures.
Some analysts believe this means Mr Lenihan will beat his target of an €18.8bn deficit this year.