The Government should deliver income tax cuts of at least €1 billion in the budget, it was claimed yesterday, as the Department of Finance published figures showing a stronger than expected surge in income tax receipts in October.
Davy stockbrokers said the Government should deliver tax cuts of a similar size to those introduced in the last two budgets because the current tax shortfall of €630 million for the year was "bearable".
"There is a compelling case for tax cuts at this point in the [ economic] cycle to bolster consumer spending in 2008," Davy economist Rossa White said.
Tax receipts last month trailed Government estimates by €140 million, but the shortfall would have been more substantial if higher than anticipated income tax returns had not helped to offset another weak month for property-related taxes.
The latest exchequer returns show that the tax take from stamp duty is down 9 per cent for the year at €2.7 billion and fell 30 per cent in October, while capital gains tax and VAT are also behind target.
But income tax receipts are running ahead of target at €10.3 billion - up 12.5 per cent in the year to date compared with a Government forecast of 9.3 per cent.
As a result, the €140 million undershoot in the Department of Finance's estimates for the tax take was lower than in August and September.
Overall tax revenues for the first 10 months of 2007 are €630 million behind target at €34.9 billion. Minister for Finance Brian Cowen confirmed last month that the shortfall for the year would be about €1 billion, almost double the amount estimated last December.
But Ulster Bank chief economist Pat McArdle said yesterday that the shortfall would be closer to €1.25 billion. "Everything still hinges on November when €11 billion, or 22 per cent of yearly tax take, is due. Half of all capital gains tax and corporation tax is paid in November so a few hundred million could easily get lost," he said.
Government expenditure is up 17.5 per cent in the year to date, compared with a forecast of 17 per cent, with total net voted spending coming in at €35.7 billion compared with €30.4 billion last year.
Mr McArdle said it now looked like Government spending would end the year close to target.
But Fine Gael accused Mr Cowen of squandering the economic boom by spending at unsustainable rates.
Mr Cowen has hinted this year's budget tax package will not be as generous as in previous years, stressing that the Government's priority is to keep up its commitments to spending under the National Development Plan in order to keep economic growth afloat.
