BRATISLAVA, November 11, (WEBNOVINY) — Slower economic growth and impacts of the collapse of Iveta Radicova’s Cabinet, in the form of failure to approve planned legislative norms will cause a shortfall of close to EUR 665 million in tax revenue in next year’s state budget. This is an estimate of the Finance Ministry published in the prognosis of tax revenue on Friday. This volume is to represent 0.9 percent of the gross domestic product.
Revenue shortfalls are expected in the following years, too. Compared with the draft general government’s budget for 2012-2014, the public administration’s revenues in 2013 are to be lower by 1.5 percent of GDP, and in 2014 by 1.7 percent of GDP. In financial terms, this would mean by EUR 1.155 billion less in 2013 compared with original estimates, while in 2014 it should be EUR 1.321 billion less.
The Finance Ministry’s Financial Policy Institute said that behind the deteriorated outlook are revised macroeconomic prognoses with a negative impact in 2012 accounting for 0.8 percent of GDP. The remaining 0.1 percent falls on the failure to approve prepared legislation, in particular the tax and payroll levy reform.
The revised macroeconomic prognoses have negatively affected the expected collection of value-added tax, corporate income tax and payroll levies, as the economy is seen growing at a lower pace, while households’ consumption will be lower, as well as the wage base for calculation of taxes and payroll levies. The Finance Ministry recently revised its estimate of GDP growth for next year from 3.4 percent to 1.7 percent.
In spite of these negative impacts, Finance Minister Ivan Miklos believes it is possible to achieve a deficit of 4.6 percent of GDP in 2012. He repeated on Friday that if the deficit gap was to be higher, he is prepared to withdraw the draft budget from parliament, which would mean Slovakia would have a provisional budget next year, i.e. the budget in effect for 2011.
The shortfall in the state’s revenues may be even bigger as economic development prognoses are worse week by week. Miklos admits this, too, and recommends his colleagues from the former coalition to adopt additional austerity measures that should be debated next week.
SITA