ECONOMY

Spending cuts offset state revenue shortfall

The Finance Ministry is increasingly worried about public revenues data, as the first couple of months have shown a further decline in consumption and an increase in tax evasion.

Indirect tax collection (such as value-added tax and special consumption taxes) fell 496 million euros short of the budget target in the January-February period. In contrast, direct taxation such as income tax has reeled in some 218 million euros more than anticipated, thanks mostly to taxes on properties and the collection of expired debts.

In order to cover this shortfall in budget revenues, the ministry has frozen the payment of tax rebates to companies and taxpayers. As a result, in the year’s first couple of months, the overall picture of the budget execution is positive, revealing a considerable decline in primary expenditure which has led to the creation of a primary surplus of 487 million euros.

Direct tax revenues may have been greater than foreseen in the budget, but this is not down to income tax, which lagged the target by 20 million euros in spite of the increase in the amount withheld from salaries and pensions.

Revenues from VAT were 189 million euros less than expected, while consumption taxes lagged the target by 365 million. The special consumption taxes on tobacco and alcohol brought in 192 million euros less than anticipated, while road tax receipts fell 134 million short. With the consumption of heating oil posting an annual decline in excess of 60 percent, receipts from the special consumption tax on energy products missed the target by 28 million euros. It is only revenues from indirect taxes from previous years that have beat their target, by 85 million euros.

On the spending side, tax refunds amounted to 96 million euros, while the budget had provided for the return of some 489 million euros to taxpayers. State budget expenditure amounted to 9.42 billion euros – over 1.15 billion euros off target. Regular budget expenditure was 832 million euros below the goal, mostly because of the decline in primary expenditure by 766 million compared with that foreseen.

In the January-February period the social security funds absorbed 2.66 billion euros, or some 21.2 percent of their allocation for the year. The OTE telecom employees’ fund in particular absorbed 41.2 percent of its allocation for 2013. IKA, the largest fund, has absorbed 25 percent, and OAEE, the self-employed professional’s fund, 26 percent.