The positive evolution comes after February was a “frozen” month from a fiscal point of view, as Romania’s budget was fully affected by the bad weather, with revenues recording only a slight increase, of just 1.2%. The income tax and profit tax recorded one of the highest annual rises in March, contributing to the budget deficit being kept within the quarterly target agreed with the IMF.
The deadline for submitting the annual profit tax statement was advanced this year from April 25 to March 25 through a government ordinance published at the end of January, with the final payment of the tax on companies’ profit for the previous fiscal year to be made by the deadline for submitting the statement.
In March, the amounts collected from profit taxes totaled RON1.6 billion, exceeding by more than five times the level recorded in the same month of last year. Overall, in the first quarter of the year the rise of revenues collected from profit taxes was over 60%, to RON3.2 billion, according to the Finance Ministry.
Profit taxes are paid on a quarterly basis, until the 25th of the first month of the next quarter, so April, July and October should in principle be the best performing months of the year.
Collections from income taxes recorded a 12.7% increase in March, to RON1.7 billion, while between January and March revenues from this source totaled RON5.2 billion.
What happened with the deficit
The budget deficit totaled just RON690.5 million in March, after in February it had boomed to RON3.7 billion. Overall in the first quarter the nominal budget deficit was RON3.4 billion, above the level agreed with the IMF of RON3.1 billion, but the Finance Ministry kept within the target because the amount was adjusted for the value by which investment spending exceeded the original target, of RON6.97 billion, i.e. by RON330 million, according to the deal with the IMF. The letter of intent includes the possibility of adjusting the deficit downward by the amount that capital spending exceeded the original target only for March and June, but it remains to be seen what the new Government will negotiate with the IMF for the rest of the year.
As a share of the GDP, the deficit reached 0.6% at the end of the first quarter while in the similar period of last year the percentage was around 1%.
“This is a significant improvement after two-month data showed that a similar deficit was recorded as in the first two months of last year.”
The fact that the revenue rise returned to a two-digit pace is also a welcome development, but the degree of collection could have improved as activity rebounded after the difficult weather conditions in February,” commented Vlad Muscalu, economist of ING Bank. This year the deficit should be adjusted to 1.9% of GDP (cash methodology) and under 3% (ESA 95 methodology).
VAT rises slowly
VAT revenues did not grow at the same rate as overall revenues. After a 15.4% rise in January, in February VAT revenues went up by just 1.5% in January, and by 3.5% in March, against the similar month of 2011. In 1Q VAT revenues rose 9.4%.
(English version by Daniela Stoican)