TAX RECEIPTS in the year to August fell by 9 per cent compared to a year ago, according to the latest exchequer figures.

The State collected €18.9 billion in tax receipts in the first eight months of the year. This compares to €20.8 billion collected in the same period last year, a drop of 9 per cent.

The €18.9 billion tax take is €141 million or 0.7 per cent below the Government’s target. However, this is an improvement on the comparable figure in July, when taxes were €247 million or 1.4 per cent below target. The latest official figures show the budget is on target and economic growth is returning, Minister for Finance Brian Lenihan insisted last night.

“It is very important in terms of the kind of commentary we have seen in recent weeks which suggests that this country is in real financial jeopardy. The financial administration of the country is on target,” he said.

Mr Lenihan added that financial stability was essential for economic growth and the early signs of growth were there. “Irish growth is on the way and will continue,” he added, citing yesterday’s upgraded forecast for growth by the European Central Bank.

Davy Stockbrokers said the improvement in target performance suggests the Government’s ambitious fiscal consolidation plans are “broadly on track” and the returns consistent with early-stage recovery.

The Minister also said unemployment had now virtually peaked. “We are at the bottom of a very difficult recession but the early tentative signs of growth are there and will continue.”

Speaking on the Six One News on RTÉ, he defended his handling of Anglo Irish Bank: “It is not a question of keeping it afloat, it is a question of keeping the whole financial reputation of the country afloat. Both the capacity of the State to borrow money to meet the expenditure that everybody wants to take place, and the capacity of the other banks to raise funds to keep themselves open.”

The 9 per cent year-on-year fall in the tax take compares to the 8.2 per cent decline at the end of July.

The Department of Finance said the decline had been anticipated in the monthly target for August. This was due to a large, once-off, corporation tax payment of €350 million collected in August 2009 and which negatively impacts upon the year-on-year comparison.

While income tax remains behind target, corporation tax, excise duties and VAT all performed above expectations in the first eight months of the year.

The exchequer deficit at the end of August stood at €12.1 billion. This compares to an exchequer deficit of €18.7 billion in August 2009.

The Department of Finance said the year-on-year decline in the deficit is primarily explained by a €3 billion payment to the National Pensions Reserve Fund and a €3.8 billion payment to Anglo Irish Bank which were made in 2009 and which have not been repeated in 2010.

It said the deficit is generally in line with expectations and, as a result, budget targets for 2010 remain valid, with the Government maintaining its forecast of a total tax take of just over €31 billion for the full year, down 6 per cent compared to 2009.

Current and capital expenditure continued to decline, with capital expenditure particularly badly hit.

Capital expenditure, which stood at €2.6 billion at the end of August, is down some €1.3 billion or 34 per cent on the year, and is 24 per cent below target. According to the department, this is due to timing and operational issues and it is anticipated capital expenditure will pick up over the remainder of the year.

At €26.4 billion, current expenditure is €441 million or 1.6 per cent below the corresponding period in 2009. This is 0.8 per cent above target.

Alan McQuaid of Bloxham said the shortfall in income tax is “no great surprise” given the underlying weakness in the labour market, as evidenced in the Live Register figures for August published yesterday.

He said that the fragility of the economy should be a clear warning sign to the coalition partners that increasing the personal tax burden further at this juncture runs the serious risk of pushing the economy backwards again.

However, he said the Government should also resist the temptation to deliver more than the promised €3 billion in savings, in the “misguided belief that this will appease the markets”.