Better tax collection and a change in the EU’s accounting framework were behind the big difference according to the Financial Policy Institute.
“This result is one of the biggest positive deviations of projected budgeted revenues from reality,” Ján Remeta of the IFP wrote in the document. The difference of 6.7 percent was quite large compared to IFP’s long-term target of + or-2 percent.
The IFP ascribed the larger than projected revenues primarily to better collection of corporate and value added tax (VAT). Better tax collection brought in €968 million more than planned. Measures to combat tax evasion yielded €650 million more in VAT.
“The continuing growth of the cleared effective tax rate of VAT and the corporate tax, not expected by analysts, was a positive surprise,” Remeta wrote.
The effective tax rate of VAT continually increased throughout 2014 to about 14.7 percent.
The institute ascribed the 6.7-percent difference between the planned and actual revenues to some factors that are beyond the control of IFP like the change in accounting methodology. Other variables the IFP does take into consideration in its prognoses are evaluating the macroeconomic environment and estimating effective tax rates.
Better tax collection accounted for 4.8 percentage points of the deviation, as collection of corporate taxes and VAT exceeded the planned amounts by €435.4 million and €439.9 million respectively.
A better than expected macroeconomic environment added 0.9 percentage points and the change in the accrual methodology from ESA95 to ESA2010 added 1.3 percentage points. The European System of National and Regional Accounts (ESA 2010) is the newest EU accounting framework for systematic and detailed description of an economy. Other factors accounted for minus 0.4 percentage points.
10. Aug 2015 at 5:30 | Compiled by Spectator staff