IFP: Shortfall in Tax Revenues for 2020 Was Mere €42 Million
Bratislava, September 29 (TASR) – The shortfall in tax revenues last year was only €42 million instead of the expected €2 billion, which is a year-on-year drop of 1 percent, according to the latest prognosis released by the Financial Policy Institute (IFP) on Wednesday.
Tax revenues should grow by 5 percent this year despite the economy’s slowdown due to the third wave of the coronavirus pandemic, stated the IFP. Next year the IFP expects tax revenues to grow by as much as 7 percent, chiefly thanks to completion of the drawing of EU funds from the ending programming period and thanks to the national Recovery and Resilience Plan.
“The stable development of excise taxes and the labour market in 2020 is complemented by a corporate tax with a minimal year-on-year decrease after the processing of almost all tax returns for 2020,” stated the IFP. The original negative expectations were based on a 7-percent drop in tax and levy revenues during the crisis in 2009.
The IFP registers the most significant drop in tax and levy revenues in sectors that were hit by the coronavirus pandemic the most, such as catering, hospitality and arts. The shortfall chiefly concerned the corporate tax. Nevertheless, the long-term view shows that these sectors did not contribute significantly to the corporate tax paid even before the pandemic. From the viewpoint of company size, the biggest shortfall was posted for small companies with revenues up to €1,000,000. These fell by as much as 25 percent, however, their share in the overall tax is negligible.
The second major update is the positive VAT development. The strong VAT in the second quarter of 2021 resulted in a 7-percent year-on-year growth in revenues and return to the pre-crisis levels.
The labour market development in the second quarter of this year didn’t bring any big surprises. Revenues from income tax on private individuals and levies to social and health-care funds developed in line with the June prognosis. However, the deceleration is expected to come at the end of 2021 along with the third wave of the pandemic, which will be reflected in lower expected revenues.