Figures from the Department of Finance show another sharp deterioration in the public finances last month, with tax receipts now almost €2.8 billion short of what had been expected at Budget time.
The Exchequer deficit for the first eight months of the year was just over €8.4 billion, three times the figure for the same period last year.
Total tax receipts were just under €24.8 billion, with VAT receipts running more than €1.1 billion behind expectations as consumer spending weakens. Stamp duties are almost €500m behind target and capital gains taxes are more than €400m lower than expected.
Income tax is holding up slightly better than other areas, however, and is around €150m behind expectations. The numbers also reveal that the amount collected in taxes during the month of August was 20% less than expected.
If this pattern continues, however, the Exchequer tax shortfall could be up to €5 billion by the end of the year.
Bloxham economist Alan McQuaid said he now thought the Exchequer would record a deficit of €8.5 billion in 2008, leaving Minister for Finance Brian Lenihan with 'a major headache' as he prepares to present his first Budget.
Mr McQuaid said the Exchequer figures reflect how serious the economic slowdown has become. 'We think the economy could contract by as much as 2.5% this year,' he added.
Stockbroker Davy said the tax shortfall was likely to reach €4.5 billion by the end of the year, and it was 'almost certain' that Ireland would breach EU rules which limit the public deficit to 3% of economic output. But Davy added that this was not of concern as the economy needed a stimulus, ideally before December's Budget.
Meanwhile, the Construction Industry Federation has said the Government, the banks and builders must urgently come up with some new financial incentives to stimulate house building and house sales throughout the country.
Speaking in Galway, its director general Tom Parlon said the CIF believed that up to to 30,000 couples and individuals were holding off buying houses because of the credit crunch and uncertainty in the market.