The combination of higher growth and the increase in inflation is good news for tax revenues.
The estimates on both fronts are being upwardly revised for this year – the midterm fiscal plan provided in April for zero inflation and 3.6% growth – so the target for tax takings this and next may also be revised higher.
The Finance Ministry is now able to expand on the 2022 first budget draft, to be tabled in Parliament in three weeks, adding to its recipe for more tax collections at lower rates.
The increase in GDP, as reflected by the 16.2% annual jump in the second quarter, could amount to as much as 3 billion euros in absolute figures for the entire year. That would entail additional state revenues of €1.3-1.5 billion, given also the rise in the consumer price index. That amount will, to a great extent, get returned to society via support measures.
For 2021 the ministry had forecast tax revenues to come to €45.53 billion, a slight increase from last year’s €44.5 billion. It was estimated that €25.9 billion would come from indirect taxation and about €13 billion from income tax: €9.585 billion from individuals and €2.3 billion from businesses.
For next year the ministry has forecast a significant rise in tax takings, to €49.4 billion. This even incorporates the effects from the freezing of the solidarity levy for the private sector (costing some €800 million) and the reduction of the corporate income tax rate from 24% to 22% (about €240 million). Yet despite this anticipated cost of over €1 billion, both individuals and companies are projected to pay more tax through the increase in their incomes.
Indirect taxation is also projected to fetch more to the state in 2022, with value-added tax takings alone rising to €18.8 billion from €17 billion this year, and special consumption taxes producing €7 billion against €6.6 billion in 2021.
Now all these figures for this and next year will have to be revised upwardly, also factoring in the upcoming hikes in various commodities such as energy.