Budget and tax revenues in WB6, 2021-2022

Comparing the size of incomes between the economies of the Western Balkans and the EU reveals the challenges faced by each group of countries. Economies in the Western Balkans region have a small income base that hampers governments’ capacity to promote inclusive growth.

Even though COVID-19 is bringing a new wave of digitization to the region, there seems to be a need for capacity mobilization to encourage the development of new ways of collecting revenue, especially small business taxes. EU countries have a larger revenue base, which has allowed them to expand services to the population and implement relevant governance reforms over the years but face the challenge of increasing their collection at the same pace as spending. Theirs.

Economic growth combined with fiscal discipline and good public debt management seems to have affected Serbia, Albania and Bosnia and Herzegovina, respectively. However, high levels of public debt remain a present risk in most of the countries of the region.

Budget revenues in WB6 in 2022 show a decrease of -0.9% of GDP. In 2021, budget revenues reached the level of 35.6% of GDP and in 2022 at a lower level (34.8% of GDP). Budget revenues are lower than in the period before the pandemic (35.4% of GDP).

We see the highest increase in budget revenues only in Albania (as much as 0.6% of GDP). Kosovo has an unchanged indicator of budget revenues in relation to GDP.

Serbia has a decrease in budget revenues by -0.3% of GDP. North Macedonia has a decrease in budget revenues by -0.3% of GDP, Bosnia-Herzegovina has fewer budget revenues by -0.9% of GDP.

Montenegro with -4.2% less shows that the decrease from tax revenues has directly affected the budget revenues. The main reason in the case of Montenegro is exposure to the dependence of tourism, with a major impact on the administration of tax revenues.

In 2022, tax revenues account for 93% of total budget revenues. In 2021, tax revenues make up 91% of budget revenues, with a decrease in their weight in the contribution of budget revenues by 1.7 percentage points.

The progress of tax revenues seems to have followed the same trend as budget revenues. Thus, WB6 countries that have a decrease in tax revenues in relation to GDP, also have a decrease in budget revenues.

The same trend that shows the influence of tax revenues on budget revenues is seen in other countries that have an increasing performance in 2022, where the budget income is also increasing.