Income tax revenues suffer sharp fall

The Irish Government tonight put a brave face on figures which showed both the exchequer surplus and income tax revenues down sharply for the first six months of the year.

Department of Finance figures showed an exchequer surplus of €507m in the first half of 2002 compared with €3.3bn from January to June last year. A surplus of €170m has been forecast for 2002 as a whole.

Income tax decreased by 13.4% on last year despite a target increase of 1.1% set out in the last Budget by Finance Minister Charlie McCreevy.

But Mr McCreevy was not discouraged, saying: ‘‘This is in line with achieving a surplus for the year.

‘‘Although tax revenue was below expectations, extra non-tax and other revenues should help compensate for this shortfall.’’

But the effects of a report by Ireland’s Benchmarking Body, which yesterday recommended pay rises for nearly a quarter of a million public sector workers, could also hit the nation’s coffers.

The Cabinet decided today to accept the benchmarking proposals provided trade unions also signed up.

The Department of Finance statement said: ‘‘At this stage of the year, an emerging shortfall in tax revenue of the order of €500m may arise by year end.

‘‘There is also a potential additional cost of meeting benchmarking in 2002.’’

It added: ‘‘There is evidence of strong pressures on expenditure in some areas such as demand led schemes in the health area, capital expenditure on national roads and prison officer overtime, for which the Government has agreed additional funding.

‘‘Departments have been required by Government to take appropriate measures to ensure that expenditures are controlled over the remainder of the year.’’