Tax take improves in August

The Government collected slightly more tax than it had expected last month, in a further sign that the Irish economy is stabilising, according to the latest Exchequer returns data published this afternoon.

After a poor July, tax receipts in August were around €150 million better than expected for the month, although in the year to date tax revenues are still substantially lower than the targets issued by the Department of Finance.

The Government has collected almost €20.8 billion in tax over the first eight months of 2009 - some €427 million or 2 per cent below projections made at the end of April.

There was no further deterioration in August, and better than expected returns from spending-related taxes such as VAT meant it was able to reduce the shortfall, which stood at €575 million at the end of July. However, August is not typically a big month for VAT returns. Income tax, which is €263 million or 3.5 per cent behind target, fared less well last month.

On an annual basis, tax receipts are down 16.1 per cent on the first eight months of 2008.

However, the tax take from last month alone was higher than it was in the month of August 2008 - the first time this year that tax receipts have been higher than the corresponding month last year.

The Exchequer deficit widened to €18.7 billion in August and remains more than double the size of the deficit that existed a year ago.

The figures show that the Government has drastically cut capital spending, which is now running 14.6 per cent or €671 million lower than it was at the same point last year.

Current spending - spending on the day-to-day running of the State - is up 1.6 per cent or €422 million on the same period last year. This is largely due to a 13 per cent year-on-year rise in spending by the Department of Social and Family Affairs following a dramatic spike in unemployment.

However, there were tentative signs that a sooner-than-expected stabilisation in the labour market was also helping to bring social welfare expenditure under control. Spending by the department so far in 2009 is lower than estimates made at the end of April.

Earlier today, the Central Statistics Office (CSO) said the estimated rate of unemployment had increased to 12.4 per cent in August, up from 12.2 per cent in July. The number of new unemployment benefit claimants to sign on last month was 5,400 on a seasonally adjusted basis - the lowest monthly rise since April 2008.

Corporation tax and excise duty are the two categories of tax that are performing ahead of the Government's targets.

However, Ibec economist Fergal O'Brien said the buoyant performance of corporation tax, which has generated an extra €697 million for the Government compared to last year, was largely the result of changes to the payment calendar for the tax, "rather than a reflection of any improvement in trading conditions".

Mr O'Brien said he expected the end-year tax haul to come in around €1 billion lower than the €34.4 billion target set by the Government in the April supplementary budget.