The Exchequer deficit has widened to almost €10.6 billion, according to the May public finances data published this afternoon by the Department of Finance. This compares to a deficit of €3.6 billion in the same period last year.
However, better than expected revenues from income tax, excise duties and corporation tax offset further slippage in receipts from VAT and property-related taxes, leaving the Government with a tax haul of €13.5 billion for the first five months of 2009.
This is slightly ahead of the tax projections published by the Department of Finance at the end of April, but the tax take remains subdued compared to last year, with receipts down 21 per cent compared to the €17.1 billion collected in the same period in 2008.
The rate of decline has eased since last month, when the year-on-year decrease was 24 per cent. But Minister for Finance Brian Lenihan said in a statement that there were still "significant targets" to be reached in the months ahead if the Government is to reach its full-year tax receipt target of €34.4 billion.
Consumers' reluctance to spend money in the nervous economic environment continues to be reflected in the low rate of VAT receipts. The Government has collected €5.3 billion in VAT receipts since the beginning of the year. This is down 21 per cent on 2008 and already 3.7 per cent behind the April projections.
However, partly as a result of the impact of the income levy, the income tax category has held up better. At €4.6 billion, income tax receipts are down just 6.8 per cent on 2008 and are running 1 per cent ahead of the April projections.
Mr Lenihan said stabilising the Exchequer finances was essential for the recovery of the Irish economy, but repeated his opinion that scope for further tax increases was limited.
"The majority of the future budgetary adjustment will have to be borne on the spending side of the Government account," he said.
Expenditure on public services has progressed "as expected" so far in 2009, with the main pressures being in the health and social welfare departments.
The May data shows that expenditure in the Department of Social and Family Affairs has increased almost 13 per cent on the same period last year, largely as a result of the escalation in the number of unemployed people.
Overall, voted Government expenditure in the first five months came to €19.6 billion, up 3 per cent on 2008.
Alan McQuaid, an economist at stockbroking firm Bloxham, said the figures continued to paint a bleak picture of the public finances, adding that the road to recovery would be long and "unlikely to be smooth".
But he added that there was no reason why the Government should not be able to meet its revised General Government Deficit target for 2009 of €18.4 billion, or 10.75 per cent of GDP, if the economy continued to improve.
Minister for Finance Brian Lenihan said the Exchequer was now seeing the benefits of efforts to stabilise the State's finances.
“The Government is prioritising the protection of our economy and jobs. As the global economy recovers, conditions for business will improve and a return of consumer confidence can be expected,” he said.
“By stabilising the public finances, investors and consumers will be able to invest and spend with a greater degree of confidence about future Irish prospects.
"While the rate of decline has flattened out, it must be acknowledged that there are significant targets to be reached in the months ahead.”
Mr Lenihan also suggested there was little chance of further income tax rises.
“As I have said on a number of occasions since the supplementary budget, the scope for further income tax increases is limited,” he said.
Additional reporting: PA
