Ireland's tax revenues fell behind target by around half a billion euros in the 11 months to November, data showed on Friday, underlining the growing challenge facing the government as prepares to unveil its fiscal plans for next year.
Ireland has pledged to shrink its budget deficit to 10.3 percent of gross domestic product (GDP) this year under its IMF-EU bailout, and looks likely to meet that goal due to a tight lid on spending, which was 2.4 percent below target.
But with the tax revenues 1.6 percent behind target, up from 0.7 percent last month, analysts are warning that it may be difficult to hit nest year's targets.
The worrying thing is the trend in revenue is weakening and that has to be a concern, said Alan McQuaid, chief economist at Bloxham Stockbrokers.
There is a risk that the budget deficit will be higher rather than lower in 2012, even if it is on target this year, he said.
The government is already under pressure over planned cutbacks in an austerity budget to be announced on Monday and Tuesday that is expected to take 3.8 billion euros out of the economy.
Analysts have warned that slowing growth could force it to ramp up austerity measures even further.
The government has said it plans to increase the VAT rate by two points to 23 percent at the budget, but a 4.6 percent shortfall in VAT receipts in November indicates it may struggle to secure the 670 million euro boost it hopes to get from the measure.
Clearly the numbers here today indicate you are going to have difficulty, McQuaid said.
Corporation tax was 6.3 percent behind target and income tax receipts were 2.1 behind in November, the most important month of the year for tax collection due to end-of-year tax deadlines.
Overall, Ireland's budget shortfall widened to 21.4 billion euros to the end of November from 13.4 billion euros a year ago, largely due to capital injections into the country's lenders.
Stripping out the near 11 billion euros in capital funnelled to the banks and including a 1 billion euros gain from the sale of part of the state's share in Bank of Ireland
Expenditure was down came in below target, mainly due to capital expenditure cuts, which were 11.7 percent, or 406 million euros bellow target.
(Reporting by Carmel Crimmins and Conor Humphries; editing by Ron Askew)