Tax revenue boosts budget

Much better-than-expected tax revenue has seen the budget primary surplus significantly outpace the stated goals in the first seven months of the year.

The primary surplus – which excludes spending on servicing the country’s debt – reached €5.683 billion at the end of July, much higher than the target of €1.655 billion.

Overall, including debt servicing, the budget presents a deficit of €121 million, versus an expected €3.745 billion.

In the month of July alone, tax revenue, mostly from income and corporate tax rather than indirect taxes, reached €7.739 billion: €1.059 billion, or 15.7%, higher than initially estimated.

Overall, tax revenue in the seven months of the year reached €36.993 billion – €2.317 billion, or 6.7%, higher than budget estimates – data from the budget execution bulletin released Friday showed.

Finance Ministry officials said the extra revenue not only helps achieve the goals of the Stability Program, negotiated with the European Union and released in April, but leaves a cushion of €432 million for discretionary spending. But the ministry is quick to shoot down any demands for handouts, many having the backing of their own MPs. Spending the whole cushion would violate European Commission guidelines to contain spending increases this year to 2.6%. Fiscal rules, relaxed under the successive pandemic and energy crisis, are being tightened again at a time when global uncertainties persist.

In any case, out of the €2.317 billion in extra tax revenue, €647 million is from the previous year’s taxation, as taxpayers had until February to pay the income taxes assessed last year on their 2022 income. Thus, the real tax revenue gains, from taxes paid on 2023 income, is €1.67 billion.

At the General Accounting Office, they are worried that July’s haul could be a one-off driven by those who paid their taxes in one go, instead of in up to eight installments, to benefit from a 3% discount.