The government has received its first major warning that the budget is in trouble in the form of indirect tax revenues for the first couple of months this year, and this at a time when its negotiations with the country’s creditors are in full swing.
The data released on Monday by the State General Accounting Office showed a shortfall in revenues from value-added tax and special consumption taxes. Still, the excessive containment of state expenditure has resulted in a particularly high primary surplus, which softens the impact of that shortfall.
Combined with the new social security contributions system based on taxable income, it seems the tough austerity measures introduced since January 1 have led not only to a drop in consumption but also a rise in the phenomenon of undisclosed incomes.
Finance Ministry officials argue that a clearer picture on the course of budget figures will emerge from the results of the first four months, as freelance workers and small businesses will pay their VAT due at the end of April.
The main sources of revenues to have shown a shortfall compared to the targets for January and February were the VAT on tobacco (13 million euros or 14.8 percent below target), VAT on other commodities (144 million or 6.2 percent), the special consumption tax on energy products (14 million or 2 percent), special consumption taxes on other commodities (118 million or 26.5 percent) and other consumption levies (12 million or 21.9 percent).
All signs point to March continuing along a similar path, with the 15 percent drop in supermarket turnover indicating a slide in VAT revenues. A recent forecast by researchers IRI regarding a 3.6 percent annual drop in turnover at supermarkets in 2017 generates greater concerns about the extension of the economic contraction well into this year too. If further austerity measures are adopted – even if they concern 2019 – the forecasts for 2017 will have to be revised downward given the prospect of pension cuts and a reduction in the tax discount.
And yet the year to end-February has produced a primary budget surplus of 2.135 billion euros, against a target for 864 million euros. Notably, in the same period last year, the primary surplus had amounted to 2.853 billion.