Country's finances deeper in the red
State coffers continued to collapse last month with the country now €14bn in the red, new figures revealed today.
The tax take is down around a fifth, or €3bn, on last year.
Despite the deepening hole in the public finances, Finance Minister Brian Lenihan said the figures were largely in line with projections made less than three months ago.
“The figures show that the difficult but necessary decisions taken in the recent April Supplementary Budget are taking effect,” he said.
“Stabilising the public finances is a critical part of the renewal of our economy.
“We must pursue this course of action resolutely to allow all in society to benefit from the upturn in the global economy when it occurs.”
Exchequer returns for the first six months showed state coffers are now three times as bad as this time last year.
The property crash has seen stamp duty and capital gains tax shrink by a third of what it was, while the drop in spending has seen VAT fall by €1.5bn.
Department of Finance officials accepted that the figures would have been much worse except for changes to the corporation tax regime and they revealed excluding these extra levies from big business the tax take is down a fifth.
Under the new system the artificial revenue boost in June will disappear as the year goes on.
Mr Lenihan, however, claimed the speed that tax receipts were drying up was now easing.
“There are still substantial targets in the months ahead, so tax revenues will need to be carefully monitored as the year progresses. Nonetheless, overall tax revenues are close to our mid-year target,” he said.
The department’s figures showed the full extent of the country’s dwindling finances with a breakdown of tax returns compared to the first six months of last year:
- Stamp Duty from the property market down from €962m to €344m.
- Capital Gains Tax from selling assets down from €623m to €199m.
- Income Tax down from €5.9bn to €5.4bn.
- VAT from consumer spending down from €7.08bn to €5.57b.
- Corporation tax from big business up from €1.43bn euro to €1.88bn.
Officials said the Exchequer deficit is €14bn compared to €5bn euro last year after €9bn was spent on the state pension fund, recapitalising Anglo-Irish Bank and the fall in taxes.
Labour’s finance spokeswoman Joan Burton dismissed the Minister’s assessment of an easing in the rate of decline in tax.
“No amount of bluster by Taoiseach Brian Cowen that things are ’getting worse more slowly’ can hide the fact that these figures are very bad,” she said.
“The Government claims that the half year exchequer figures are only slightly behind target, but it must be remembered that the tax target of €34.4bn is already 15% down on the disastrous 2008 return and a whopping 27% off the 2007 peak.
“Tax revenue looks set to fall below 20% of GDP this year, one of the lowest rates in the world.”
Ibec, the business lobby group, said poor tax takes remained a concern.
The organisation’s senior economist, Fergal O’Brien, also rejected claims that the economy was moving out of recession.
“The underlying weakness in the VAT and income tax receipts for June show that activity levels in the Irish economy are showing no signs of having turned a corner,” Mr O’Brien said.
Fine Gael's finance spokesman, Richard Bruton, accused the Minister of trying to "spin" the figures.
“The returns for the first half of the year again demonstrate the deep hole in the public finances, over 90% of which the IMF (International Monetary Fund) has put down to Fianna Fáil’s poor domestic policy,” Mr Bruton said.
“Taxpayers will take no comfort that this is Fianna Fáil’s second attempt to reach even this dubious position.
“And the direct consequence of the Government’s budgetary strategy, which concentrated on raising taxes and slashing capital budgets, is unnecessarily high unemployment.”
