this is exactly how inflation also affects public finances:
1) When prices rise, you will suddenly pay 50% more for food in the supermarket, and therefore pay 50% more VAT. The state has an increase in tax revenue.
If they raise your salary quickly, which happens in the private sector, you will also pay higher income taxes and contributions, and the state will also receive more taxes from your income.
This can be seen in the blue rectangles above in the graph: the year-on-year growth of tax revenues and levies was ALREADY in double digits in 2022.
In 2023, the growth of tax revenues will continue, later the growth will slow down. However, the year 2023 is already painted optimistically.
2) What is scary are mandatory expenses (benefits, pensions, aid, public administration salaries). That’s the silent killer.
Despite the increase in income, no one will admit that “within a year and a day” it will be necessary to increase expenses, which are also growing due to the populism of MPs and governments (party members = non-economists). Expenditures are also growing due to legislative formulas that raise many expenditures with a delay in relation to measured inflation.
In 2022, the year-on-year growth was not even 1%. But in 2023, spending growth will be 21%.
Even in 2024, the strong growth of expenses will continue, later it would slowly and naturally subside. But there is no room for that. It will be necessary to act immediately. There is a patient in the ICU who needs to be resuscitated.
Of course, the Ministry of Finance knows this and put the graph (above) in the Stability Program, which is a document about the health of our finances for the European Union. It is an excellent and clear document to read.
The 2023-26 version of the Stability Program is a horror for the reader, but in April 2023 the deputies saw it and accepted it in the NR SR.
And we also received a corresponding report on the painted budget and the state of public finances from the EU. Specifically, it was given to Marcel Klimek, who represented Igor Matovič (because he was dismissed) and Eduard Heger, who did not have time to represent Igor Matovič.
This party subsequently presented 2022 to the nation as the year of “public finance consolidation”, the year-end status as “good condition” and the trend during its rule and looting in the pantry as “improvement”.
Well, in a non-partisan and unbiased way, it must be said that the state and condition are very bad, the prediction is miserable and, as was said: action must be taken. It has already started…
1) Beyond the budget until September 2023, extended energy subsidies for gas and electricity (what we called for): about 300 million euros (in the 1st quarter it was 160 million euros).
2) Pensions and an adjusted parental allowance were valorized (which is catching up with the rate of inflation since the beginning of this government: 30%). It is understandable and the amount is about 600 million.
Together, we are at 1 billion against the 2023 budget on the expenditure side. No tax is paid on pensions and neither levies (yet) and energy subsidies do not include VAT. So on income to the budget: ZERO.
Action must be taken.
If you subscribe to the print .week for the next year, you’ll help us survive and do what we know how to do. Thank you in advance.