It is already certain today that the Minister of Finance Zbyněk Stanjura will keep this year’s deficit under the threshold of 295 billion crowns. At the end of November, the deficit reached 269 billion, and after the experience of previous years, it is most likely that it will not increase by more than 25 billion during the twelfth month.
“December will be strong in terms of income, so I assume that we will maintain the planned deficit for this year,” the minister does not hide his optimistic mood.
At the same time, no one would have believed such predictions in May. At that time, expenses exceeded income by 271 billion. Stanjur’s officials succeeded in averting the expected budget disaster thanks to the fact that during the summer months, high levies from the profits of energy companies and banking houses, delayed subsidies from the EU, dividends from the state company ČEZ and a larger part of the collection of the newly introduced tax on extraordinary income landed in the state treasury.
The state also earned an unexpectedly large amount of money from the personal income tax. After its sharp decline in 2021, when its real rate was reduced by the abolition of the so-called super-gross wage, levies are quickly recovering thanks to inflation and the fact that the real rate is increasing again. By the end of November, employees and entrepreneurs paid 131 billion to the state treasury, i.e. “only” four billion less compared to the same period in 2020.
Nevertheless, the final success of Stanjur’s budget policy was decided by the tax title, which so far has not met expectations. Despite double-digit inflation, revenues from value added tax (VAT) grew by only four percent year-on-year. The tables turned in November, when seven billion (25 percent) more were collected for VAT compared to last year’s eleventh month. Just in time for the November budget deficit to keep a sufficient distance from the deficit planned for the whole year.
The VAT surprise may hide even better news. The increase in the collection of this tax may be the first sign that consumers who have been saving hard since last autumn have woken up. Consumer spending in shops is the main source of VAT. However, there is also another explanation, that Minister Stanjura used the method of his predecessor Andrej Babiš. If necessary, he temporarily improved the budget balance by withholding VAT advances made there by entrepreneurs on the accounts of the tax authorities.
The Ministry of Finance itself explained the unexpected success with VAT simply by saying that “tax collection in November itself was positively influenced by, among other things, a higher number of working days”.
It is thanks to better tax collection that the state budget of 2023 has such paradoxical results. The economy is stagnating, government spending has so far grown by 230 billion compared to last year, i.e. the second fastest pace in history, yet the budget deficit has been reduced.