August Portugal Ministry of Finance Budget General Directorate

Transcription

1 Budget Outturn Summary Report 2014 August Portugal Ministry of Finance Budget General Directorate

2 Monthly edition Published on 24 th September 2014 Based on information available until the 23 rd September Budget General Directorate Internet site:

3 1. Summary OVERALL BALANCE 1. Summary General Government (GG) provisional balance, in cash basis accounting, amounted to -4,685.7 million until August, which compares unfavorably with -5,454.6 million for the same period of the previous year. Table 1 General Government budgetary implementation Source: Ministry of Finance Jan-Aug Execution I quarter 14 II quarter 14 Millions Jan-Aug General Government Balance (cash basis) , ,2-844, , ,7 Central Government , ,5-869, , ,5 State , , , , ,5 Autonomous Services and Funds excluding reclassified SOE 1.108,6 218,1 781, , ,5 Reclassified State Owned Enterprises -556,5-979,0-161,9-405,4-509,5 Regional Government -474,9-831,3-124,5-291,9-337,5 Madeira -476,2-825,7-129,4-279,7-339,2 Açores 1,2-5,6 4,9-12,2 1,7 Local Government -11,3-62,6 75,4 254,9 416,9 Social Security 491,4 489,1 74,2 470,0 410,3 Central Government and Social Security balance attained -4,765.1 million ( -4,968.4 million in 2013), while primary balance recorded -103 million ( million in 2013), corresponding to a revenue increase rate of 4.2%, above the expenditure s increase (3.3%). Regional and Local Government recorded a balance of 79.5 million ( million for Local Government and million for Regional Government). Excluding the suppliers debt regularization effect under the PAEL (Local Economy Support Program) and loans contracted by Madeira Autonomous Region, the resulting budget surplus would have been of million for the overall subsector ( million in the same period 2013). 3

4 2. Central Government and Social Security OVERALL BALANCE Central Government and Social Security overall and primary balances amounted to -4,765.1 million and -103 million until August of 2014, respectively. Expenditure increased 3.3% over the same period last year, to which contributed mainly the behavior of transfers and employees compensation. The rise in transfers resulted from the change in the accounting criteria of the State transfer to Local Government of the variable share on Personal Income Tax-PIT (IRS) and the time lag of 14th month allowance paid to the retirees (in 2014 the payment occurred in July, while, in 2013, occurred in November). In the case of employees compensation, the growth was due to the reversal of the salary measure 1 effect as well as the time lag of allowance holidays payment for public servants. Regarding revenue, the change rate was 4.2%, a result of increased tax revenues and contributions for social security systems, partially offset by a reduction in transfers to the Social Security with provenance from the European Social Fund. 1 The 2014 budget act led to a reduction of the salaries of civil servants, this measure having been considered as unconstitutional by the Constitutional Court. Presently, the 2011 salary reduction, of lesser intensity compared to 2014, was reapplied since the 12 th September. 4

5 Table 3 - Central Government and Social Security Consolidated Account Period: January to August Accumulated Execution YOY cumulative Change Rate (%) Millions YOY Change Rate Contrib. (p.p.) Current revenue , ,0 4,4 4,3 Tax , ,2 8,0 4,3 Direct taxes , ,8 9,4 2,2 Indirect taxes , ,4 6,9 2,1 Social security contributions , ,3 7,5 2,1 Current transfers 1.778, ,7-39,1-1,6 Other current revenue 4.547, ,5 6,4 0,7 Consolidation differences 535,1 51,2 Capital revenue 865,0 814,3-5,9-0,1 Sale of investment good 38,8 78,3 101,5 0,1 Capital transfers 686,6 614,9-10,4-0,2 Other capital revenue 136,9 120,8-11,8 0,0 Consolidation differences 2,6 0,3 Effective revenue , ,3 4,2 Memo Item: Non tax revenue 7.725, ,7-12,1-2,2 Current expenditure , ,4 3,4 3,2 Employees 8.114, ,2 8,9 1,5 Purchase of goods and services 6.333, ,7 0,1 0,0 Interests and other charges 4.401, ,2 5,9 0,5 Current transfers , ,7 3,0 1,6 Subsidies 1.306, ,3-2,9-0,1 Other current expenditure 618,7 360,2-41,8-0,5 Consolidation differences 16,2 120,1 Capital expenditure 1.936, ,0 2,2 0,1 Investments 844, ,8 26,4 0,5 Capital transfers 1.074,6 877,2-18,4-0,4 Other capital expenditure 6,8 28,0 310,6 0,0 Consolidation differences 10,1 5,1 Effective Expenditure , ,4 3,3 Memo Item: Current and capital transfers , ,9 2,1 1,1 Overall balance , ,1 Primary expenditure , ,3 3,1 Current balance , ,4 Capital balance , ,8 Primary balance -566,6-103,0 Source: Ministry of Finance and Social Security Financial Management Institute 5

6 EXPENDITURE Central Government and Social Security expenditure increased 3.3% until, reflecting a slowdown when compared to the previous month (+3.9%). Likewise, primary expenditure s change rate reduced to 3.1% (+3.4% until July 2014). The evolution of employees compensation (+8.9% which compares to +9.3% until July) was mostly determined by: i) The payment of the holiday allowance to employees in public functions, which, in the previous year, was paid in November 2 ; ii) Reversion of the 2014 State Budget remuneration reduction measure; and iii) The increasing of the contribution rate of public employers to Caixa Geral de Aposentações (CGA) 3 and for Social Security. The slowdown of employee s compensation expenditure was explained by the dilution of the first effect described above - will occur until November of this year as well as the effect of retroactive payments in July concerning to June, and also the expenditure associated with the terminations by mutual agreement program. Purchase of goods and services expenditure increased 0.1% (+0.4% until July). This evolution was influenced by the rhythm at which the amounts allocated to the institutions of the National Health Service have been processed by the regional health authorities, under the contract programs with hospitals belonging to the public enterprise sector. Interest and other charges increased 5.9% (8.6% until July), explained by the evolution of the charges related to direct State debt (11.2%), which mostly reflects the increase of interests related to Treasury Bonds and and to loans under the Economic and Financial Adjustment Program. On the other hand, the financial charges incurred by the State Owned Entities decreased 49.2%, result which is mostly related to the conversion of State loans into State share capital in some public enterprises of infrastructure management and to the earlier settlement of derivative interest rate contracts operations (swaps) performed in Transfers 4 change rate was 2.1% to which contributed mostly the increase in pensions of social security and CGA pension system as well as from 2014 onwards, the State transfer to Local Government of the variable share on Personal Income Tax-PIT (IRS) is accounted in budgetary expenditure, with equal reflex in tax revenue. The slowdown of this expenditure item until July (+ 3%) was due to the previously described effect of the time lag in payment of the 14th month to retirees and pensioners as well as the reflection of a sharper reduction of financing contribution to the European Union Budget (-6.9% which compares to -3.4% until July). 2 Under the Law n.º39/2013, of June 21st ("Regulates the replacement of the holiday allowances for public workers, retirees, pensioners and other pensioners in 2013"). 3 Caixa Geral de Aposentações, IP (CGA) is the public body that administrates the Portuguese civil servants pension scheme. 4 Since March edition on, current transfers and capital transfers are analyzed together. 6

7 REVENUE Subsidies decreased slightly when compared to the previous month (-2.9% which compares to -2.5% until July) was mostly justified by the decrease of compensatory allowances to companies for providing public services which is result of a different schedule of the publication of Resolution of Council of Ministers. Also to be noted that the reduction of benefits conceded by Social Security for vocational training financed by the European Social Fund was over offset by the increasing by the vocational training taken by IEFP 5. Other Current Expenditure evolution almost kept the reduction rate of the previous month (-41.8% until August which compares to -40% until July), result that remained determined by the evolution of vocational training expenditure in education area 6. Investment expenditure increased 26.4% (10.9% until July). The oscillation of the variation rate of this expenditure item is attributable to a different pattern of intra-annual expenditure with road concessions. Central Government and Social Security revenue increased 4.2% (+2.9% until July), evolution which was determined by the tax revenue and social security systems contributions YOY growth (8% and 7.5%, respectively). That result has implicit an improvement in revenue performance based mainly in the acceleration of tax revenue. Tax revenue increase was supported by a rise in both direct (9.4%) and indirect taxes (6.9%). Note that this result was influenced by the fact that, from 2014 onwards, the revenue from the contribution on Banking Sector - which collection in the current year amounted to EUR million until August - is registered as tax direct. Similarly, a part of the revenue from social games, consigned to Social Security - with a value of EUR million until - began to be recorded as indirect taxes. Both categories of taxes were classified as "non-contributory and non-tax revenue" in To the evolution of Direct taxes revenue contributed the Personal Income Tax revenue growth of 11.8% 7 (+6.1% until July), reflecting the labor market conditions improvement and the positive impact of enhanced control over withholding delivered by employers. By its turn, Corporate Income Tax (CIT) decreased 4.3% a less pronounced decrease comparing to the previous month (-9.1%). This evolution was mainly explained by the change of the intra-annual collection pattern related to each CIT component of voluntary collection and also the different intra-annual effect of the reimbursements. Indirect taxes variation was 6.9% until August, mainly explained by the behavior of Value Added Tax (VAT) (+7.7%) 8 and, although with a lesser weight in the contribution to the revenue change rate, the tax on vehicle (+36.6%). 5 Institute for Employment and Vocational Training 6 It is noteworthy, in this context, the impact of the reclassification to Employees amounts that were recorded in "other current expenditure item. 7 The variation includes the accounting adjustment of the transfer of the variable participation of Local Government in the PIT (IRS) as recommended by the Court of Auditors (TC) 8 From July to August, the remaining categories of indirect taxes recorded marginal variations regarding to evolution of contribution to the rate of change. 7

8 The acceleration of indirect taxes revenue (5.3% until July) was attributed to the favorable behavior of VAT revenue (+5.3% until July) 9. This evolution was explained by the economic recovery and the enhanced control and action against tax evasion and the underground economy, as consequence of the results obtained with the invoice reform and the reform of the transport documents. Social Security systems contributions kept the YOY increase observed in the previous month (7.5%). This result was mostly determined by the CGA contributions (+17.2%) which remained explained by the increase of public employers rate of contribution in 2014, the enlargement of the extraordinary solidarity contribution basis and the reversion of the 2014 State Budget remuneration reduction measure. It is important to underline the positive effect of revenue contribution to Social Security which increased 3.2% until August. Non-tax and non-contributory revenue evolution (-12.1%), was explained by the reduction of Social Security revenue from the European Social Fund (-42.1%) and of dividends received from the Bank of Portugal. This result was also influenced by the already mentioned reclassification of the Contribution over the Banking Sector and the social games revenue consigned to the Social Security. 9 This value differs from what is in Table 6 - "State Revenue" attached to this publication, as there is other Central Government entities which benefit of VAT revenue and are not included in the State subsector but in the Autonomous Services and Funds. 8