Primary surplus comes in above 500 mln in the year’s Q1

The government’s efforts to rein in the budget deficit appear to be bearing fruit, as the first quarter of the year brought a primary surplus of 508 million euros despite revenues coming in 351 million off target, Alternate Finance Minister Christos Staikouras announced on Wednesday.

The data showed a major improvement from the target for a primary deficit of 2.3 billion euros, while the budget deficit (including interest payments etc) amounted to just 1.33 billion euros against a target of 4.18 billion.

“In the fiscal field the country is winning many battles. This is necessary but not enough by itself to win the war,” warned Staikouras.

Indirect tax revenues are proving to be the biggest problem in the budget’s execution, as value-added tax revenues missed their target by 7.3 percent in Q1, or 260 million euros, out of which 126 million concerns VAT from fuel. The shortfall is growing in percentage terms every month.

A major lag is also observed in the special consumption tax on tobacco and alcohol. Revenues from tobacco tax missed their target by 144 million euros, attributed to the increase in cigarette smuggling and consumers smoking less due to the tax hike. Revenues from energy commodities taxes were 55 million euros off target.

However, that was partly offset by the revenues from property taxation, which exceeded their target by 100 million euros, while receipts from income tax were 31 million euros higher than the figure hoped for.

The primary surplus was the result of cutting expenditure by 1.8 billion euros more than budgeted. Primary expenditure was contained by 1.1 billion euros, while Public Investment Program spending was reduced by 671 million euros.

Primary expenditure totaled 11.2 billion euros in the year’s first three months, while in March alone it came to 3.5 billion – 12 percent less than in March 2012.

Tax rebates were a worrying 69 percent lower than the target set for the first quarter, with the state having returned 213 million for the 2012 fiscal year, as well as 570 million euros in overdue receivables.

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