Surprise surge in tax take helps cut shortfall by €20m
INCOME tax revenues were better than expected last month, helping to knock €20m off the tax shortfall for the year so far.
Exchequer returns from the Department of Finance show that income tax payers handed over €850m in July -- about €14m more than had been expected.
Stamp duties, which are charged on house purchases and on share transactions, were also slightly stronger.
At €17.1bn, total tax revenues for the first seven months were 1.4pc less than the amount estimated at Budget time last December.
The figures are still puzzling, because data suggests the economy is doing better than was forecast in the Budget, yet tax revenues are not.
Wage cuts may be to blame, and falls in consumer spending on items which carry large taxes -- at least in the early months of the year.
Excise duties -- charged mainly on alcohol, tobacco and fuel -- were also stronger in July, bringing them back into line with forecasts.
A survey of managers in the services sector yesterday showed that business picked up in July, and was driven mainly by sales in the Irish market.
Brian Devine, chief economist at NCB Stockbrokers, believes falling prices are the main reason that tax revenues have slipped.
"The nominal (cash) value of the economy at the end of 2009 was some €4bn less than initially estimated," he said.
The figures suggest the Government is broadly on track to raise €31bn in tax revenues this year and keep net spending to €46bn.
Capital spending was €660m below target in July, while day-to-day current expenditure was on target.
Despite rising interest rates and the use of expensive short-term loans for safety, debt services costs on the national debt were €213m less than had been anticipated.
Davy Research economist Rossa White said the chances of the deficit being much smaller than that were slipping as the year goes on.
"Earlier in the year, we thought there was a good chance that the government forecast of tax revenue for the full year was too low.
"We still expect tax revenue to eclipse expectations, but upward momentum is slow at this point and revenue may only reach €31.5bn for 2010.
Labour TD Sean Sherlock, who is a member of the Oireachtas Economic and Regulatory Committee, said that trying to reduce the deficit without a proper jobs and growth strategy "is like a dog chasing its own tail".
"The Government just doesn't seem to get the fact that growing the economy, getting credit flowing to SMEs and tackling the jobs crisis are fundamental to closing the budget deficit," he said.
AIB cuts after €2bn loss: see Business supplement