Tangible budgetary and economic effects from the Social Resistance Package
In the decision taken today by the Government through the approval of Normative Act No. 3, dated 12.3.2022, has reflected the budget changes for the implementation of the Social Resistance Package.
Differently to what we previously calculated, through the government decision it turns out that tax revenues have changed by an increase of ALL 10 billion (2.8% increase compared to the initial budget law 2022), and expenditures increase at the same value.
The largest increase in tax revenues could be observed according to the table below:
- VAT is planned to increase by ALL 7 billion, as an effect of increasing turnover mainly from inflation, but also as compensation for planning with reduction of national taxes;
- Profit tax is planned to increase by ALL 2 billion as a result of increased turnover and increased profits in some more profitable sectors;
- Personal income tax is planned to increase by ALL 2 billion, mainly from the effects that may come from labor taxation;
- National taxes are the only ones that are planned with a reduction of 3 billion ALL, which can mainly come from a new fiscal policy (unknown until now), or reduction of the level of royalty due to possible international political crises their export to Asian markets and beyond;
| Mln. ALL | |||||
| No. | ITEM | Budget 2022 | N.A 3/2022 | Difference | Diff (%) |
| TOTAL REVENUES | 536 811 | 546 811 | 10 000 | 1,9% | |
| II. | Tax Revenues | 500 167 | 510 167 | 10 000 | 2,0% |
| II.1 | Tax and Customs | 360 535 | 370 535 | 10 000 | 2,8% |
| Value Added Tax | 166 061 | 173 061 | 7 000 | 4,2% | |
| Corporate tax | 35 586 | 37 586 | 2 000 | 5,6% | |
| Excises | 56 478 | 58 478 | 2 000 | 3,5% | |
| Personal Income Tax | 45 161 | 47 161 | 2 000 | 4,4% | |
| National Taxes | 49 741 | 46 741 | -3 000 | -6,0% | |
| TOTAL EXPENDITURES | 637 694 | 647 694 | 10 000 | 1,6% | |
| I. | Current Expenditures | 507 349 | 501 549 | -5 800 | -1,1% |
| 1 | Personnel | 91 590 | 89 388 | -2 202 | -2,4% |
| Wage | 75 630 | 73 743 | -1 887 | -2,5% | |
| Social and Health Contributions | 12 460 | 12 145 | -315 | -2,5% | |
| 3 | Operational & Maintenance | 63 241 | 59 643 | -3 598 | -5,7% |
| Central Government | 56 541 | 53 143 | -3 398 | -6,0% | |
| Twining projects | 500 | 300 | -200 | -40,0% | |
| 5 | Special Funds | 212 271 | 212 271 | 0 | 0,0% |
| Social Contributions | 148 865 | 148 135 | -730 | -0,5% | |
| Contingency for new pension policies | 2 570 | 3 300 | 730 | 28,4% | |
| Pensioners’ Bonus | 3 500 | 3 500 | 0 | 0,0% | |
| 7 | Other Expenditures | 27 650 | 27 650 | 0 | 0,0% |
| Unemployment insurance benefits | 900 | 900 | 0 | 0,0% | |
| Social assistance and disability | 23 550 | 23 550 | 0 | 0,0% | |
| Compensation for ex political prisoners | 1 000 | 1 000 | 0 | 0,0% | |
| Birth Bonus for babies | 2 200 | 2 200 | 0 | 0,0% | |
| II. | Reserve fund, Contingency | 2 900 | 8 650 | 5 750 | 198,3% |
| Reserve fund | 2 400 | 2 650 | 250 | 10,4% | |
| Contingency – Social Resistance Package | 6 000 | 6 000 | |||
| Contingency “Offer for children” | 500 | 0 | -500 | -100,0% | |
| III. | Capital Expenditures | 119 445 | 109 496 | -9 949 | -8,3% |
| Domestic financing | 62 766 | 57 594 | -5 172 | -8,2% | |
| Foreign Financing | 34 502 | 29 902 | -4 600 | -13,3% | |
| Reconstruction Fund | 20 000 | 20 000 | 0 | 0,0% | |
| Capital transfers to expropriation account | 1 178 | 1 000 | -178 | -15,1% | |
| V | Energy Sector | 8 000 | 8 000 | 0 | 0,0% |
| Loan given for Energy | 8 000 | 8 000 | 0 | 0,0% | |
| Budget support for the energy sector | 20 000 | 20 000 | |||
| BUDGET DEFICIT | -100 883 | -100 883 | 0 | 0,0% | |
While tax revenues are planned to increase by a total of ALL 10 billion, budget expenditures are planned to increase by ALL 10 billion, but without affecting the level of the budget deficit, which remains unchanged at ALL 100.88 billion.
Some changes have been made in the budget expenditures, where we can clearly see that:
- Less expenditures on salaries and insurance of budget employees have been reduced by ALL 2.2 billion;
- Maintenance expenditures for central government have been reduced by ALL 3.6 billion;
- Capital investments have decreased by ALL 9.9 billion, where ALL 5.3 billion are from domestic funds and ALL 4.6 billion are from foreign funds;
- The pension fund has increased by ALL 0.73 billion, according to the inflation index;
- Reserve funds have increased by ALL 5.75 billion, influenced (a) by the increase by ALL 0.25 billion of the reserve fund available to the PM, (b) by the increase by ALL 6 billion of the funds available to the PM for what may happen as a result of the unforeseen effects of the war, and (c) the fund available to the PM for children has been reduced by ALL 0.5 billion.
- Budget support funds have increased by ALL 20 billion for the energy sector.
In all the budgetary changes that are reflected in the financial statements of the Budget 2022, it is noticed that the biggest benefits from the budget funds are received by (a) the fund for the energy sector and (b) the reserve fund available to the PM, which will be used after adoption of specific decisions on the transfer of funds to the poor and social groups in need.
In the entirety of expenditure shifts, it looks that staff costs, maintenance costs and capital investments need to be reduced to cope with the increase in the energy fund and the social assistance package, also balanced by the increase in tax revenues.
The biggest reductions are in capital investments (there are no specifics for which projects).
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