Budget results in surplus from capital expenditure savings

Tirana Times
By Tirana Times May 15, 2019 17:00

Budget results in surplus from capital expenditure savings

Story Highlights

  • The government collected 4 percent more revenue during the first four months of 2019 and resulted in a 4.3 billion lek surplus due to the cutting of capital expenditure and income from municipalities taxes, even though it increased current expenditures in wages and maintenance, and the taxes and customs didn’t collect the planned revenue.

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TIRANA, May 15- The government will not be increasing capital investment on this electoral threshold. According to fiscal statistics of the first quarter of the year, capital expenditures for January-April were 14.6 billion lek (117 million euros), down 20 percent compared to the same period a year earlier. In relation to what was planned at the beginning of the year, the government’s spending on roads, hospitals, water supply, schools etc., were 26 percent less, or 5.3 billion lek (45 million euros) in nominal values.

While being economical in terms of investment spending, government institutions have not been so sparing for other expenditures. In total, budget expenditures increased by 3.4 percent compared to the same quarter last year, reaching 144.6 billion lek (1.17 billion euros), yet 4.8 billion lek (38.8 million euros) less than the previous year, a saving that came largely due to lower capital investment. The highest rates were recorded in current expenditures by 1.1 billion lek (8.9 million euros) more than planned, mainly for wages, interest and maintenance, which increased by almost 7 percent.

Salary expenditures were nearly 2 percent higher than those of January-April of the previous year. The government spent nearly 11 percent more to pay up debt interests from loans received, where the highest growth had the interests of the external debt. The government also spent nearly 54 billion lek (437 million euros), or 37 percent of its total spending to subsidize pensions, as the increasing number of retirees and the deterioration of the contributor-benefit ratio is increasingly aggravating the pension scheme. Unemployment and economic assistance payments increased by 76 percent and 15 percent respectively over the first four months of 2019, compared to the same period last year.

Nevertheless, overall with revenues totaling about 149 billion lek (1.2 billion euros) and expenditures of 144.6 billion lek (1.1 million euros) as a result of saving from capital expenditures, the budget again resulted in a surplus of 4.3 billion lek (34.8 million euros) in January-April, much higher than the forecast of 338 million lek (2.7 million euros). Even compared to the same period of the previous year, the budget surplus was about 31 percent higher.

Revenue

Taxes and customs collected for the budget about 149 billion lek (1.2 billion euros) in the first four months of the year, an increase of 4 percent compared to the same period last year, or about 5.8 billion lek (46.9 million euros) more. Compared with the previous months, April was the best as it collected nearly 40 billion lek (323.5 million euros), the highest level so far in 2019 (in January, for example, collected only 34 billion lek). This has caused the failure to realize the plan to be less than 1 percent for the first four months. Tax revenues amounted to 140.4 billion lek (1.1 billion euros), with an annual growth of 4.5 percent, with a slight failure to complete the plan.

Regardless, their revenue performance wasn’t as high as anticipated as it grew by only 1.8 percent with an unrealized plan of 3.1 billion lek (25 million euros). This failure was due to the poor performance of VAT, one of the main taxes in the budget, revenues from which declined by 2.3 percent in relation to last year’s first quarter. Finances have claimed that this poor performance of VAT is related to the decline in the work activity in the Trans Adriatic Pipeline (TAP) pipeline project. Together with the project no longer operates the chain of companies that have connected the supply of goods and services with the TAP project. According to the Ministry of Finance, this has created weaknesses in collecting VAT revenues.Poor performance also had national taxes, while the most positive item was profit tax, with a 17 percent increase and exceeding the plan by almost 1.7 billion lek (13.7 million euros), which somewhat amortized the failure to realize the plan from VAT and national taxes.

Failure to implement the plan from customs duties has been compensated almost entirely by the good performance of local government from its local and wealth taxes with a 2.5 billion lek (20 million euros) more than planned. Income tax revenues, following a weak performance in the first three months of the year, swayed in April. Local government collected nearly 1.5 billion lek (12.1 million euros) only in April, from 847 million lek (6.8 million euros) collected in the first three months together, with a surplus of 1 billion lek (8 million euros) for the plan of the four month period. During this year it is expected to start the collection of the property tax based on the new formula based on the value of the property.

Exceeding the 1.5 billion lek (12.1 million euros) plan had revenues from local taxes, with a 40 percent increase compared to the same period of the previous year. Municipalities are rejoicing more revenues as a result of the infrastructure tax they are receiving from construction permits, especially in the capital. Income from social and health insurance was about 33 billion lek (267 million euros), in line with the plan. Non-tax revenues amounted to 7.7 billion lek (62.3 million euros), with a slight overrun of the plan.

Tirana Times
By Tirana Times May 15, 2019 17:00