July budget targets missed as taxpayers fail to pay first installment

Finance Ministry data released on Thursday confirm there is a black hole in state revenues for the month of July, mainly due to a large number of people not having paid the first installment of their additional income tax.

Net revenues for July amounted to 4.931 billion euros – 756 million below the target set in the medium-term program for 2018-21.

Revenues from personal income tax were 215 million euros off target, while tax from businesses was 161 million euros short.

However, revenue from other sources came in below target too, including VAT on tobacco (24 million euros) and petroleum products (23 million euros).

The hole was caused partly because of increased tax returns in July that reached 468 million euros – 242 million more than the monthly target set in the midterm program.

In a bid to ease concerns, Deputy Finance Minister Katerina Papanatsiou argued on Thursday that the budget targets will remain on track despite the July shortfall.

Moreover, she said that the practice of not paying the first installment is commonplace, as many taxpayers hold back in the hope that the government will announce new monthly installment programs.

She added that 30 percent of people didn’t pay their first installment in July 2016, compared to 28 percent this year. “Even this 2 percent is a [good] sign,” she told radio station Praktoreio 104.9 FM.

However, according to sources, the government’s financial staff is concerned about the lag, given that the representatives of the country’s international creditors are due to arrive in the fall to begin the third review of Greece’s third bailout.

This is because the International Monetary Fund has repeatedly insisted that Greece will not be able to achieve the target of a primary surplus of 3.5 percent of gross domestic product in 2018. This is only likely to fuel creditor concerns with regard to 2018, and could pave the way for demands for yet more austerity.

This year’s primary surplus target is 1.8 percent of GDP.

For the time being, the primary surplus remains on target due to government’s policy of withholding spending, which has had a negative knock-on effect on economic activity.