The public finances continued to stabilise in June, but income tax receipts remained weak, according to the latest Exchequer data released earlier today.
The figures show the Exchequer was in deficit by €8.9 billion as the first half of the year drew to a close, marking a €6 billion improvement on the same point of 2009.
The difference is due largely to non-recurring factors however, such as last year's €3 billion contribution to the National Pensions Reserve Fund and a further €3 billion paid to Anglo Irish Bank.
A breakdown of the numbers shows that income tax receipts continue to be a black spot for the Exchequer, falling 5.8 per cent, or €304 million behind the Department of Finance's expectations in the first half of the year.
Department officials said it was difficult to pinpoint the reasons for the shortfall, but they acknowledged that shorter working hours, lower hourly pay and people moving into the black economy could be contributing factors.
Overall, the State took in €14.4 billion in taxes over the first six months, which was €227 million, or 1.6 per cent below the department's forecasts.
Corporation tax was 2 per cent ahead of expectations at €1.57 billion, while capital gains tax was 23.6 per cent ahead. Excise duties were a touch lower than forecasts at just over €2.1 billion.
The combined tax take was almost 9 per cent lower than in the same period of last year but this was largely expected, with the Department pencilling in a 6 per cent annual decline in taxes for 2010 as a whole.
On the spending side, the Government remains well behind its targets for capital spending, which came in almost 25 per cent below expectations at €1.8 billion.
Officials said this kind of spending is "lumpy" and can be set off-target by factors such as weather, tender prices and landowners' appetite to sell property.
Day-to-day spending was more or less on target for the first half at €19.7 billion.
The cost of servicing the State's debt has so far cost €240 million less than the Department had anticipated at Budget time, with this trend likely to continue in the second half.
This should see debt servicing costs coming in €350 million lower than expected for the full year, officials said.
Minister for Finance Brian Lenihan said the returns showed the deficit was generally in line with Government predictions. He said tax receipts were “broadly moving in the right direction”, despite being 1.6 per cent behind forecasts.
He described the performance of VAT and corporation tax – which both came in marginally ahead of forecasts - as encouraging.
Taoiseach Brian Cowen said the figures, combined with this week’s data from the CSO showing Ireland is emerging from recession, show the Government “took the right, although difficult, decisions in last year’s budget”.
Newly appointed Fine Gael finance spokesman Michael Noonan said the fall in income tax receipts indicated that the jobs crisis was getting worse and reinforced data provided by the Live Register.
“Monthly income tax receipts in June were the lowest since September 2009, and for the year to date were more than €300 million below the target set by Minister Lenihan in his Budget,” Mr Noonan said.
The Exchequer figures come days after data from the Central Statistics Office showed the economy technically emerged from recession in the first three months of the year.
Officials said that in light of this and other signals in areas such as consumer confidence and exports, the Department of Finance was now likely to examine its own economic projections, possibly pencilling in positive growth for the year.
Ulster Bank economist Simon Barry said that it was notable tax revenues had fallen behind target for a second month.
“While the €80 million shortfall in the month will in itself have no significant bearing on budget arithmetic, it is notable that, following the solid performance in April, the tax revenue position has continued to deteriorate.”
