Support measures on a fiscal tightrope
Gov’t is eager to expand handouts, thanks to tax on refineries, but leeway is still unknown
The pre-election period is getting under way this month for the Finance Ministry with a series of support measures for various social groups, amounting to some 850 million euros.
It will be extended in 2023 with the interventions provided for in the budget, which add up to about €2.4 billion in additional spending and possibly something new, sponsored by the new tax on refineries’ profits. The State General Accounting Office is making the year’s final calculations, adding to the already planned measures – announced in September – new announcements such as the extraordinary Christmas handout to police and port police members, but also the obligations of the new legislative regulations.
The question of whether any new measures will be added in 2023, beyond what the budget foresees, is open and the leeway that will be given by the new taxation of refineries, based on the recently published European regulation, is being examined. All eyes are on the date of the budget vote, next Saturday, when the prime minister will close the debate. At the moment, however, there are uncertainties which make it difficult to make a decision.
First, it is uncertain how much the new tax will bring in, as it is based on 2022 profits for which there is still no overall picture. Given the nine-month results for the the refineries, which made a total profit of about €2 billion, the Accounting Office calculates that the tax of 2022 could reach €600 million, ensuring significant “fuel” for benefits. However, in practice the amount could be higher or lower.
A second source of uncertainty is the price of natural gas, on which the price of electricity depends. With an average gas price of €120 per kilowatt-hour, continuing to support household electricity bills at the current levels does not burden the budget, but for every 10% price increase, the cost is €300 million.
The government wants to exhaust every margin for more support measures, but the Finance Ministry assures the target for a primary surplus of 0.7% of GDP in the 2023 budget must be met.
