After four months, when Minister Zbyněk Stanjura (ODS) successfully reduced the deficit with the help of extraordinary revenues, October brought a return to normalcy. The budget deficit has deepened again, specifically to 211 billion crowns, yet Minister Stanjura claims: “Thanks to savings and high tax collection, we should maintain the planned deficit of around 295 billion.” However, it is not won in advance.
From May to September, the minister managed to reduce the deficit by 91 billion thanks to an unexpectedly high income tax return from energy companies and banking houses, the collection of an extraordinary windfall tax, a record dividend from the state company ČEZ and an influx of Brussels subsidies for the National Recovery Plan.
October marked a return to the usual crisis times. The deficit grew unexpectedly quickly by 30 billion, the same high increase in the deficit during October was recorded only in the crisis year of 2009.
The thirty billion increase in the deficit in the tenth month is mainly due to the fifteen billion subsidy to energy companies. The state had to pay it as compensation for the loss they suffered when they supplied customers with electricity and gas at a price above the government ceiling. The government spent ten billion more than last October on investments, and social benefits claimed an additional eight billion.
The unexpectedly deep deficit produced during October reminds us that the biggest test for this year’s budget is yet to come. The state traditionally spends the most in November and December, specifically between 2020 and 2022, the deficit increased by at least 70 billion during the last two months. Therefore, even this year, Minister Stanjura cannot claim with complete certainty that he will comply with the planned deficit of 295 billion.
State budget in October
Data in billions of CZK
|Expenses since the beginning of the year||1240,6||1452,7||1538,4||1584,1||1788,9|
|Expenses in October||116,4||141,7||133,1||145,3||171,5|
|Personal income tax revenue since the beginning of the year||132,2||121,1||85,4||97,1||119|
Source: Ministry of Finance
Fortunately, he can rely on tax collection. At the end of the year, large companies will pay another tax advance on profits, which they managed to increase to a record this year thanks to inflation.
In the case of personal income tax, the effect that economists call the “inflation tax” will appear. If wages in nominal terms grow faster due to inflation, the weight of the tax credit on the taxpayer, which is not increased by inflation, also decreases faster when calculating the tax. As a result, the real tax rate for employees will increase for income tax.
“Inflation tax” is the difference between the real tax rate after and before inflationary wage increases. This year, in ten months, it brought twenty billion to the state budget.