Why revenues missed the target for January
The Greek economy’s deepening recession is evident in budget data for the year’s first month, as revenues from value-added tax declined by 17.4 percent and while income from special consumption taxes fell 38 percent short of the budget target.
This development has generated major worries at the Finance Ministry, which is realizing that the economic contraction may actually be bigger than forecast in 2013. Total revenues in January amounted to about 4.05 billion euros, according to provisional figures issued by the ministry, compared to a forecast for 4.357 billion. As a result the shortfall amounted to about 307 million euros.
While the definitive figure for 2012 revenues from VAT was 14.95 billion euros, the forecast for this year is 13.7 billion. Although the ministry had expected a decline in consumption, the January data show a greater-than-forecast contraction.
Revenues from the special consumption tax on fuel were 1.1 percent higher than the budget target last month, but VAT revenues from fuel were 12.7 percent lower, a difference which ministry officials attribute to the delay in VAT payment while the consumption tax is paid directly to the state. They also point to soaring tax evasion, which has resulted in big revenue losses for public coffers.
Another major blow to the budget is the significant decline in tobacco consumption tax revenues. Takings from the tobacco tax in January were a considerable 40.8 percent below the budget target. This came at the same time as the increase in the special consumption tax. Ministry sources again attribute the lost revenues to the huge increase in cigarette smuggling, while more and more smokers are purchasing the tobacco directly from the producers. They add that in the next few months the ministry will begin inspections to track down farmers who are selling tobacco illegally.
In total, January revenues missed the target by 7.2 percent. The reduction would have been even greater had it not been for direct taxation, which had increased significantly. Income tax grew by 9.6 percent, while property taxation soared by a staggering 77.7 percent, providing a much-needed boost to budget revenues.
A similar development is expected this month, too, given that the last installment of income tax (paid in seven portions) will be paid, while property taxes will be paid throughout the year. Property owners are still paying the property tax (FAP) for 2010, while payment of the installments for the 2011 FAP will start next month, and notices for the 2012 version of the FAP will be sent from June.
By May, all property owners will also have to have paid the remaining two or three installments of the special levy on properties which was tagged on to electricity bills for 2012. After all that, the new single property tax for 2013 will start coming due, in the second half of the year.
Despite the lagging revenues in the year’s first month, the midterm fiscal plan tabled on Friday in Parliament provides for an increase compared to the original budget by as much as 405 million euros. Therefore, the revenues for 2013 will come to 50.8 billion, up from a budget target for 50.4 billion. The plan suggests that the increase will derive both from direct and indirect taxes.