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€115m income tax drop

THERE were new fears for the state of the Government coffers as income tax fell short by €115m in the last month.

Severe weather in the early part of this year is believed to have weakened casual employment levels, owing to a fall back in tax returns.

The Exchequer returns for February showed a better than expected revenue from VAT, which meant public finances were broadly on target.

VAT receipts came in at €78m more than expected but, year-on-year, the tax take is down by €1bn (17.8pc).

The Exchequer showed an overall budget deficit of €2.4bn in the first two months of 2010.

However, there was some indication that spending levels were slowly coming under control as day-to-day Government spending was 8pc below the first two months of 2009.

The Government plans to hold spending at 2009 levels this year and should be helped by fewer than expected numbers signing on the Live Register.

Thanks to public spending cuts introduced in the December Budget, the amount spent was about €817m lower in February than in the same month a year earlier.

Austin Hughes, chief economist at KBC Ireland, warned that the gap between spending and taxes suggested there would be further significant adjustments needed in the 2011 Budget.