Income, VAT and property taxation boost budget

The definitive budget implementation data for the first seven months of the year that were released Thursday confirmed the existence of excess tax receipts, although, at €4.8 billion, the extra inflows are lower than the €5.1 billion estimate based on provisional figures.

The good news was overshadowed by the fresh rise in the price of natural gas above 300 megawatt-hours, which further restricts the so-called “fiscal space” on which the government is placing its hopes for extra handouts that Prime Minister Kyriakos Mitsotakis is expected to announce on September 10 in his keynote speech at the Thessaloniki International Fair.

The primary budget deficit, which excludes debt servicing payments, for the January-July period stands at nearly €1.1 billion, instead of the more than €5.8 billion forecast when the budget was debated late last year. 

Net revenue was up €4.8 billion, in part due to the inflow of €644 million from the European Union’s Agreement on Net Financial Assets (ANFA), which sets the rules and limits for holdings of financial assets related to national tasks by the eurozone members’ central banks. The amount had not been anticipated in the budget.

Tax receipts were €30.1 billion, higher by €4.2 billion, or 16.3%. Three taxes are mostly responsible for this: property tax ENFIA (an extra €1.2 billion), value-added tax (€1.1 billion) and income tax (€1 billion). Of those, the property tax’s first three installments were paid earlier than originally designed (from May-July instead of September-November). Thus its positive impact on revenue will be temporary.

Of all taxes, only the Special Consumption Tax brought in less than planned; the gap is €192 million.

The new rise in the price of natural gas set alarm bells ringing at the Finance Ministry. At these levels, the expected fiscal space of €2 billion until the end of the year will be all taken up by the electricity price supports.

Ministry officials are hoping that this margin will be higher based on new estimates of higher economic growth that will bring in more revenue, as well as hopes that power consumption will drop as the peak tourist season ends.