Government budget deficit rises €440 million to April 2020 ({{contentCtrl.commentsTotal}})

Government debt stood at 2.3 percent of GDP on year to April 2020 (picture is illustrative).
Government debt stood at 2.3 percent of GDP on year to April 2020 (picture is illustrative). Source: Leonhard Foeger/Reuters/Scanpix

Public sector budget deficit stood at 2.3 percent of gross domestic product (GDP) at the end of April, the finance ministry says. The deficit rose by €440 million, to €587 million on year, the ministry adds, mainly due to falling tax revenues. The budget deficit refers to the government sector, including local government, though central government spend accounted for the bulk of the change.

Several state budget expenditures have increased, BNS reports, in particular state budget subsidies, including social benefits, pensions, and investment. At the same time, state budget management costs have been declining for several months in a row, according to BNS. The impact of the crisis is also reflected in the position of local governments and social security funds, which are also worse off than last year.

Since the data concerns the year to end of April 2020, the full effects of the coronavirus pandemic on the public sector have yet to make themselves known, though clear signs are already identified.

Breakdown

Government sector deficit

  • Government sector deficit rose by €440 million, a rise to 2.3 percent of GDP, to April 2020.
  • The state budget has seen reduced revenues from asset transfers, environmental fees and the sale of emission quotas.

Local government

  • Debt increased by €11.5 million with regard to local government allocations, and for technical reasons, there was also a high base last year, which is why receipts for local governments decreased by 8.5 percent in April.

Tax revenues

  • Tax revenues have fallen by €140 million, to €583.9 million.
  • 31.2 percent of tax revenues planned for the year via the government's supplementary budget issued in response to the pandemic were satisfied in the first four months of 2020.

VAT and excise

  • VAT and excise duty payments reflected the realities of the COVID-19 pandemic more than march had done, BNS reports, but a steeper fall in labor taxes is likely still to come.
  • April's fall in VAT payments was 5 percentage points lower than for March, at 15.8 percent, largely the result of a deeper decline in corporate turnover compared with the previous month.
  • VAT debts fell by €12 million on the previous month as the grace period allowing unpaid tax liabilities interest rates to stand at 0 percent ended, following the end of the easing of some restrictions.
  • VAT obligations rose most in agriculture (32 percent rise) and least in wholesale (27 percent fall).
  • Excise duties revenues stood at €233.2 million, a fall of 33 percent on year. Movement restrictions, leading to declining fuel sales and alcohol purchases, as well as a rise in debt, were behind this primarily, BNS reports.
  • Alcohol excise duty payments fell by 34 percent to April.
  • Declared (in terms of excise) quantities of strong alcohol and beer fell on year by 6.5 percent and 13.3 percent respectively.

Labor taxes and wage, employment figures

  • Labor taxes and wage, employment figures.
  • April wage growth slowed to 2.2 percent; this figure does not include Unemployment Insurance Fund (Haigekassa) payments as part of the state's wage support scheme (up to 70 percent of a worker's salary, to a maximum of €1,000, were paid in one month in April and May, the scheme has been extended to June).
  • Wages fell most in retail, accommodation and services, but were held up by the transport, storage, education and public administration sectors.
  • Job positions as a whole fell by 2.8 percent in year, particularly in administration roles and also in hospitality.
  • The share of employees as declared to the Tax and Customs Board (MTA) fell to 58.6, from the total working-age population, the same level as for early 2018.
  • The impact of the emergency situation is likely to be greater in future since April's declarations mostly reflect work done in March – the government's emergency situation, declared in response to the pandemic, started on March 12.
  • The decline in social tax payments slowed up, from -4.0 percent to -0.2 percent, between March and April, partly due to the increase in the social tax debt, which was higher in March than April. The payment was supported by the social tax paid by the Unemployment Insurance Fund from salary compensation in April to the amount of €6.5 million.

Personal and corporate income tax

  • Personal income tax receipts remained at 2019 levels. €12 million in income tax was refunded in April, a €4 million-rise on year.
  • Corporate income tax receipts stood at €34.6 million, a rise of 35.8 percent (€9.1 million) on year; the result of income tax paid on private distributed profits, which increased by €10 million. Corporate tax revenue is affected by both the volume of dividends and the lower income tax rate on regularly distributed profits, according to BNS.
  • €31.7 million was declared in lower rate of income tax in the first four months of 2020, €6.6 million more than last year.
  • In addition, credit institutions have the right to deduct from income tax the advance income tax paid in 2019, but it is unlikely that banks will distribute profits to maintain liquidity in the economic downturn this year, so this option is not likely to be used, BNS reports.
  • The negative effect of the lower tax rate on tax revenues is reduced by an additional 7 percent income tax on dividends taxed at a rate of 14 percent for resident shareholders. In four months, this has been received as personal income tax to the extent of €7.3 million - €3 million more than 2019.

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Editor: Andrew Whyte

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