William Malcolm

Budget Deficit Hits 298.1 Billion Crowns In August

The state budget deficit at the end of August rose to 298.1 billion crowns from 279.4 billion crowns in July. The Ministry of Finance informed about it today in a press release. This is the worst August result since the establishment of the Czech Republic. Last year, at the end of August, the deficit was CZK 230.3 billion.

At the end of August, total budget revenues increased by CZK 16.7 billion year-on-year to CZK 946.1 billion. Tax revenues, including social security premiums, increased by CZK 29.4 billion year-on-year to CZK 820.9 billion, while tax revenues excluding insurance premiums alone fell by CZK 10.3 billion year-on-year to CZK 429 billion. At the end of August, total budget expenditures rose by 84.5 billion year on year to 1.2442 trillion crowns.

“Anti-epidemic measures applied mainly in the first quarter of this year had a negative impact on tax revenues of the state budget.

The ministry also informed that 422.1 billion crowns went from the state budget to fight the coronavirus pandemic from last March to the end of August this year. Direct measures, for example in the form of compensatory bonuses, Antivirus programs and other programs, required CZK 274.1 billion. The deferral of tax advances was calculated by the Office at 32 billion crowns and health care expenditures in the form of the purchase of protective equipment, rewards for health professionals or debt relief for selected hospitals at 116 billion crowns. From January to August this year, the Ministry of Finance calculated the total aid from the budget at 204 billion crowns.

“According to our expectations, the pressure to widen the state budget deficit will weaken in the second half of the year. Although our forecast assumed higher tax collection than planned by the Ministry of Finance, corporate income tax items and at the same time the pressure on the expenditure side will ease, so we still expect the resulting state budget deficit of 400 billion crowns, “said Komerční banka economist František Táborský. He added that the results for the last two months suggest that the resulting deficit could be slightly lower.

At the end of August, the collection of value added tax increased by CZK 3.6 billion year-on-year to CZK 185 billion. The collection of corporate income tax increased by CZK 22.5 billion year-on-year to CZK 77.6 billion.

On the other hand, the collection of personal income tax fell by 26.7 billion to 65.4 billion crowns. According to the Ministry of Finance, the year-on-year comparison reflects the impact of tax changes effective since 2021, in particular a reduction in the tax base by more than 25 percent and an increase in the taxpayer’s rebate. The collection was also negatively affected by the compensation bonus paid during 2021.

In the case of expenditure, current expenditure increased. At the end of August, the state spent 1.16 trillion crowns on current expenditures, up 94.7 billion more year-on-year. On the other hand, capital expenditures fell by 10.2 billion year on year to 84.2 billion crowns. The approved budget envisages capital expenditures of 187.5 billion crowns for the whole year.

At the end of August, the state paid 463.6 billion crowns in social benefits, a year-on-year increase of 13.1 billion crowns. Of this, 354.2 billion crowns went to pensions.

The state budget deficit of CZK 500 billion has been approved for the entire year. Last year, when the result was affected by the effects of the pandemic, the state budget ended in a deficit of 367.4 billion crowns. For next year, the Ministry of Finance proposes a new deficit of 376.6 billion crowns.