The Tax Reform is Working (Analysis of Budget Statistics)

The Ministry of Finance published data on the execution of the government budget for the first two months of 2006. The data is quite interesting and deserve detailed analysis.

In the first two months of 2006 the revenues in the consolidated government budget exceeded 2.7 billion leva – an increase of 6.6% compared to the same period of the previous year. The budget expenditures increase by almost the same rate – 6.5% and reach 2.56 billion leva. The budget surplus is also greater than last year – till the end of February it is 146.5 million leva, 9% higher than the corresponding level in 2005.

 

Table 1: State budget – execution to February

thousand leva

2005

2006

Change

Revenues

2,536,060

2,704,680

6.6%

Expenditures

2,401,677

2,558,217

6.5%

Surplus

134,383

146,463

9.0%

Source: Ministry of Finance

 

If we look at the budget expenditures, we can see that some expenditure rise a lot – wages, social security contributions, and other decrease considerably – subsidies, maintenance. As the state employees have not received 60% increase of their wages, we can explain the rise of the wage expenditures (and the decrease in other items) only with shift in the accounting of the expenditures. Because of this reason the comparison of the data is difficult and details are difficult to be analyzed.

In respect to the total spending, it is clear that its growth is higher than in the previous year, which is not a good sign. In order to have stability of the public finance, it would be better to have slower increase of expenditures.

 

 

Table 2: Expenditures of the state budget – execution to February

thousand leva

2005

2006

Change

Wages

243,825

390,792

60.3%

Social security contributions

87,778

125,211

42.6%

Maintenance

557,387

453,447

-18.6%

Interest

336,713

318,142

-5.5%

Social expenditures

947,714

1,076,113

13.5%

Subsidies

77,179

56,660

-26.6%

Capital expenditures

151,081

137,852

-8.8%

Source: Ministry of Finance

 

In the first two months of the year the revenues of all taxes are rising, with the exception of the excise duties. It is ironic, as excises are taxes that were increased significantly in the beginning of the year. The dividend tax revenues continue to rise by a tremendous rate – more than 50%. VAT receipt increase by almost 25% and the corporate and income taxes – by a little more than 10%. Even the social security tax revenues are increasing although their rate was decreased in the beginning of 2006 by 6 percentage points (from 42.7% to 36.7%).

 

Table 3: Tax revenues – execution to February

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2005

2006

Change

Social security tax

648,552

651,890

0.5%

Corporate tax

89,992

100,498

11.7%