LISBON Dec 21 Portugal's tax revenues fell 5.8 percent in the first 11 months of the year from a year earlier, undermining the government's fiscal adjustment effort under an international bailout, the finance ministry said on Friday.
Still, core state sector deficit shrank 21 percent to 7.72 billion euros ($10.2 billion) mostly thanks to a one-off transfer of banks' pension funds to the state that already helped the debt-laden country meet its budget deficit target last year.
Tax revenues have fallen despite a range of tax hikes this year due to the country's deep recession, prompting an easing of Lisbon's deficit targets for this year and next by the lenders from the European Union and the IMF. They have nevertheless praised the government's austerity drive.
The data showed effective revenues, which include the transfer of the banks' pension funds, rose 3.1 percent to 35.3 billion euros, but tax revenues alone slumped to around 28.9 billion euros. Spending fell 2.3 percent.
Even though Portugal's lenders have praised the country's performance under the bailout, there are concerns that tax revenues could suffer more next year as the government launches the largest tax hikes in living memory.
The economy is expected to have contracted 3 percent this year, and the government forecasts another 1 percent drop in 2013. ($1 = 0.7590 euros) (Reporting By Andrei Khalip, editing by Shrikesh Laxmidas)