Government figures show that there was a shortfall of almost €1.2 billion in tax receipts in the first five months of 2008.
The Exchequer deficit in the first five months was almost €3.6 billion, in sharp contrast to the situation this time last year when a surplus of €260m was recorded.
The tax take was just over €17.1 billion, compared with the €18.3 billion expected by the Government. This marks a sharp deterioration from April, when taxes were more than €700m behind target.
A breakdown shows that income tax receipts, at just under €5 billion, were broadly in line with expectations, but VAT receipts were around €600m behind at €6.7 billion. Stamp duties, affected by the housing slowdown, were €806m, almost €130m below expectations, while capital gains tax was more than €360m down.
The shortfall in overall taxes collected by the Government has now doubled in the space of just two months. If this trend were to continue for the remainder of this year, the need for corrective action by the Government to keep the Budget on course could not be ruled out. The shortfall in taxes during May alone amounted to €430m.
The big shortfall in VAT will worry the Government and economists, as it suggests that the slowdown which started in the construction sector is now spreading to the rest of the economy, resulting in a slowdown in retail sales growth. In addition, excise duty receipts are running €88m behind target.
Speaking in the Dáil this afternoon, the Minister for Finance Brian Lenihan said that his department did not expect the shortfall in tax receipts to be recouped later in the year. He said that an updated view of the expected Exchequer position for 2008 will be published by his department in early July. He also said that the consensus was for a growth rate of 2% this year.
