Lower pay and fewer bonuses to blame as tax take falls short
WAGE cuts, less overtime and fewer bonuses for workers have resulted in income tax receipts falling short last month.
The latest Exchequer returns show tax receipts for the first five months of the year are slightly behind target -- with income tax the main problem.
The Government got almost 5pc less income tax than expected last month, leaving a shortfall of €219m on income tax so far in 2010.
The overall tax take was €12.12bn so far this year, rather than the €12.27bn expected -- 1.2pc or €148m off the target set out in last year's budget. Overall tax returns are also down 10.4pc compared to last year.
The Department of Finance said the shortfall in income tax was not because of the rise in unemployment, but because people are being paid less, work fewer hours and are getting fewer bonuses.
The Government was warned any further increase in income tax would be ill-advised because the receipts in this area are not matching up already.
Davy stockbrokers' economist Rossa White said the income tax problem shows the previous increases, in the Budgets of October 2008 and April 2009, "has proven counterproductive so far".
Fine Gael finance spokesman Richard Bruton said the Exchequer deficit of almost €8bn so far this year is only half of the story, as the Anglo Irish Bank bailout has driven Ireland to the top of the EU's deficit league.
And the worst may be over as the rate of job losses has slowed by 37pc since last year, but experts said it is too early to celebrate a recovery.
Although the pace of redundancies has slowed after hitting record levels last year, more than 250 people are still losing their jobs every day.
A total of 5,032 jobs were axed last month according to the Department of Enterprise, Trade and Innovation's latest figures, compared with 7,948 in the same month last year, a drop of 37pc.
The level of job cuts roughly tallies with live register figures also released yesterday, showing an increase of over 6,600 people signing on last month.
Economist Jim Power said the country had "fallen out of a plane, hit the ground, but had still not got up", although he does not expect the rate of job losses to accelerate.
Ireland's 13.7pc jobless rate is the third highest rate in the 30-member OECD, behind Spain, in first place, and Slovakia.
Although the dole figures may overestimate the number unemployed, as they also include workers whose hours may have been reduced, the redundancy figures are likely to underestimate the real number of job losses.
This is because the official figures only account for workers who had jobs for two years or more before they lost them.
The Department of Finance said the Exchequer returns were "generally in line" with expectations.
Capital Gains Tax came in 32pc higher than forecast at €111m, while Capital Acquisitions Tax beat forecasts by almost 17pc.
VAT was marginally ahead of forecasts at €4.87bn, while Corporation Tax was also 3pc higher than originally predicted at Budget time at €748m.
Stamp Duty was 14pc lower than budget predictions, coming in at €244m.
The difference in the deficit is mainly due to payments to the National Pensions Reserve Fund. A payment of €3bn was made into the fund in May 2009.