Exchequer figures for the month of October show the Government raised €4.3 billion less than expected from taxes during the first ten months of this year.
This was a shortfall of 12% compared with the original target for 2008. However, the outcome was broadly in line with the Government prediction at the time of the Budget last month that the tax shortfall for the full year could be as high as €6.5 billion.
Reduced spending by Irish consumers was one of the biggest driving forces behind the widening tax shortfall.
The figures show that the amount collected in Value Added Tax and Excise Duties was €2 billion below the amount targeted for the first ten months of the year.
The slowdown in the property market is also continuing to severely damage the public finances. The figures show that the amount collected through Stamp Duty and Capital Gains Tax was running €1.5 billion behind target reflected in the downturn in prices and activity in the housing market.
The corporate sector is also paying less tax because they are making lower profits as a result of the slump. Reflecting this, the amount collected through corporation tax was €560 million behind target by the end of October.
On a slightly more positive note for the Government, the extra taxes announced on cigarettes and petrol during the budget last month boosted the tax take a little during October.
The result of this was that the taxation shortfall was slightly less than it might otherwise have been.
Nevertheless, it is far too soon to know whether the Government's view on the taxation shortfall in 2008 is likely to prove to be accurate. As much as 20% of all taxes come in during November and economists would have to with until the November figures are published to see if the Government's view of the economy in the closing months of 2008 was too optimistic.
On the spending side today's figures show that Government spending was running as much as 616 million euro behind target at the end of November.
Today's figures also show that Government had to borrow €11 billion euro to balance the public finances during the first 10 months of the year.
Reacting to the figures, Alan McQuaid of Bloxham Stockbrokers said that matters on the economic front are likely to get worse before they get better and added that 'a supplementary Budget in the first half of next year cannot be ruled out.'
