Budget deficit widens to €2.4bn as tax take falls

The Exchequer deficit worsened to €2.4 billion at the end of February, with the Government collecting €1 billion less in tax in the first two months of 2010 than it did in the same period last year.

The latest Exchequer data published by the Department of Finance this afternoon also shows that Government spending is €817 million - or 10.2 per cent - lower than last year as a result of public expenditure cuts.

Tax receipts were 1.3 per cent or some €64 million lower than Government targets for the first two months of the year, arriving at a total of €4.73 billion. Income tax accounts for the bulk of the shortfall, coming in €115 million or 6 per cent lower than projected.

However, VAT, the other major category of tax, was €78 million or 4.2 per cent ahead of target. These VAT receipts relate to the trading period for the end of 2009.

On an annual basis, tax receipts are down 17.8 per cent year-on-year.

The Government expects to collect just over €31 billion in tax this year, down 6 per cent on the value of last year's receipts.

The Exchequer deficit widened by €323 million in the first two months of 2010 compared to the same period in 2009, which the Department of Finance said was "generally in line with expectations".

The budget position has worsened since the end  of January.

Commenting on the figures, Alan McQuaid, an economist at stockbroking firm Bloxham, said poor weather in Ireland and overseas may have been a contributory factor to the "mixed" economic data in the early part of the year.

Mr McQuaid said that if the Government "can hold its nerve" on fiscal austerity measures, there was "every reason to be optimistic" about its chances of stabilising the public finances over the next few years.

"However, failure to do so will see Ireland following in the path of Greece," he said.