Tax receipts fell by 9 per cent last month 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 million 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 Exchequer deficit at end of August stood at €12.1 billion. This compares to an Exchequer deficit of €18.7 billion in August 2009.
The figures show that the budget is on target and economic growth is returning, Minister for Finance Brian Lenihan insisted tonight.
Mr Lenihan said that the exchequer returns were on target and sowed that the budget forecasts had held up.
"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 where there. "Irish growth is on the way and will continue," he added citing today's upgraded forecast for growth by the European Central Bank.
Healso said that 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 RTÉ's Six One News, he also 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," said Mr Lenihan.
But Fine Gael finance spokesman Michael Noonan maintained there was no sign of recovery in the economy or in the jobs market. He said the Government's failure to deliver on spending commitments on infrastructure would only further undermine confidence, competitiveness, jobs and tax receipts.
"The tax take for the year to August is 9 per cent below the same period last year, up from a decline of 8 per cent last month. Income taxes are still €270 million behind target, reflecting the weak jobs market, shorter working hours and the surge in unemployment since April.
This also explains the €350 million spending over-run on social welfare," said Mr Noonan.
He said that the Government's reaction had been to slash investment in essential infrastructure projects which was down by €1.3 billion on last year and is €803 million behind target for this year.
"It looks like the Government is holding back on infrastructure projects to offset the over-runs on welfare payments and weaker than expected tax returns. This is not a formula for economic recovery.
"The gross failures of Fianna Fáil's handling of the economy are rapidly catching up with this Government. Unfortunately, it's the hard-pressed families of Ireland and the growing army of the unemployed who are paying the human price," added Mr Noonan.
Labour Party deputy leader and Finance spokeswoman Joan Burton said the Minister's claims that the economy had stabilised only proved that he was "dangerously in denial about the real situation in the national economy."
Ms Burton said the figures showed no sign of recovery. Income tax receipts remained extraordinarily weak and while VAT and other headings were in line with Government targets they were also very significantly below the yields for 2009.
"This Minister has been proven wrong time and again in his assessments of bank losses and his repeated claim of imminent recovery. It has come to a point that his personal credibility is at an all time low and nothing he says can be believed with confidence," said Ms Burton.
She said the figures should be read carefully in conjunction with a whole series of depressing data released this week that indicated an economy mired in recession with few signs of a stable recovery.
Davy Stockbrokers said that the improvement in target performance suggests that the Government's ambitious fiscal consolidation plans are "broadly on track" and that the returns are consistent with early stage recovery.
The 9 per cent year-on-year fall in the tax take compares to the 8.2 per cent decline recorded 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 was 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 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 (NPRF) 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 2010, down 6 per cent on the year.
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 Mc Quaid 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 economic 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 that 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”.