Budget receipts 16% higher in January

General budget receipts surged by almost 16% in January 2006 compared with January 2005. The increase was of just 6.3% if the 8.9% inflation rate posted during this period is taken into account.

Value added tax collection was the factor that largely generated this development, rising by almost 52% in nominal terms against last January.

Revenues from excises also increased by 17%. However, profit tax collection was 11% lower, while income and salary tax collection dropped by 7.2%.

Thus, the state budget started 2006 relying upon VAT and excises, the indirect taxes that also sustained the collection of public funds from taxpayers last year. These two taxes are the only ones to have brought additional funds in January 2006 compared with last January.

In real terms, the actual increases in the collection of these taxes are lower because of inflation: 39% for VAT and almost 8% in the case of excises.

Profit tax receipts shrank 18% in real terms compared with January 2005.

The weaker collection is not surprising: a year ago, in January 2005, companies paid 25% profit tax related to the last quarter of 2004. However, this January, companies paid 16% profit tax, which slashed receipts, despite gross profits being some 20% higher.

The income and salary tax saw a similar fate: receipts shrank in January by almost 15% in real terms. This happened despite the fact that taxes on investments (on stocks, banking deposits or real estate) were increased at the beginning of the year from 1% and 10% to the flat rate of 16%.

“The tightening of taxation on investments was announced and those who had major deals to close did so in December, so as to avoid paying a higher tax, of 16%,” says Gabriel Biris, a lawyer with the Salans law firm.

In other words, after a rather hectic December 2005 for investors, this January was more relaxed, and lower taxes were levied for smaller deals, Biris also said.

Overall, state budget revenues rose by 7.5% in real terms against January 2005, coming to almost 1.5 billion euros. Value added tax accounts for 43% of this figure, some 620 million euros.

The health budget also drew in higher revenues, at a real pace of more than 13%.

Instead, pensions and unemployment budgets saw weaker performances in terms of tax collection in January. Social security budget receipts remained unchanged in real terms, while the unemployment insurance budget saw receipts decrease by almost 5%.

Local authority budgets last month collected a total standing at 83 million euros, nearly 6% higher than in January 2005.