Half of all income tax now raised in Ireland is being used to meet the interest payments on the country’s massive debt -- and the figure will only rise.
Economists reacted with more warnings about the future of the state’s finances after the release of the latest exchequer returns.
New figures from the Department of Finance show that the state paid out €2.6bn in interest in the first five months of the year while collecting €5.1bn in income tax.
According to the Irish Independent, the figures also show the exchequer returns are marginally below target as struggling companies pay less tax than last year.
The government is currently 0.5 percent below target as higher income tax payments fail to make up for a collapse in taxes paid by companies.
However, economists believe the new figures show that the government remains on track to meet targets imposed by the International Monetary Fund and the European Union which are a condition of fresh loans.
"The public finances are performing in line with expectations,” said Ulster Bank economist Simon Barry.
Conall Mac Coille, an economist at Davy Stockbrokers, told the paper: “The figures provide more support for the view that tax revenues will meet the targets set out in the budget.”
The returns show that the government has collected €5.1bn in income tax so far in 2011 compared to just €4.2bn in the same period in 2010 despite rising unemployment and lower salaries.
Almost every other tax category from stamp duty to VAT and excise duty fell or remained flat.
The well-publicized Corporation tax came in 10.4 percent below target and almost 20 percent below last year’s figure.
Tax revenues in the first five months amounted to €12.8bn, which was 5.6pc higher than the same period in 2010.
Alan McQuaid, an economist at Bloxham Stockbrokers, told the Independent that government forecasts for a 9.9 percent increase in the tax take over 2011 look ‘overly optimistic.'
“The latest figures are disappointing but by no means a disaster,” he said.
The gap between government borrowing and spending has widened to €10.2bn compared with €7.9bn in the same period last year after the €3bn payment in promissory notes to Anglo Irish Bank and Irish Nationwide Building Society in March.