Research Dept. News
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Monthly Report, num 284 - October 2005
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Spain: overall analysis - Public sector
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Economic boom in public accounts continues
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Central government revenues growing well above nominal rate of economy…
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Central government non-financial revenues continued to rise at a very high rate in August so that the cumulative figure at month-end came to 83.04 billion euros, 17.3% more than in the first eight months of 2004. If we include revenues ceded to the autonomous communities, collections amounted to 110.51 billion euros, an increase of 14.9% over the year before.
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…boosted by direct taxes and VAT.
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The main source of revenue continued to be direct taxes which furthermore grew to a spectacular degree (20.2%) boosted by collections for corporate earnings tax. Collections for personal income tax, which continued to make up the basic core of this heading, also rose sharply by 16.4%.
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The increase in indirect tax revenues was somewhat lower although calendar factors may have changed the direction taken by these figures. In any case, value added tax (VAT) continued to be the main heading with a cumulative increase of 15.8%, well above the nominal increase in the economy. Under special taxes, most headings rose at a very modest rate. Collections for fuel tax may have been affected by lower consumption of petrol, partly attributable to the increase in fuel prices even with the increase in consumption of diesel oil, which contributed to this figure to a much lower degree. In addition, the increase in revenues from the tax on insurance premiums rose by 7.0% in keeping with the good state of the motor vehicle market. Finally, revenues coming from foreign trade were also up sharply because of increased imports and, of course, from the effect of increased prices for imported oil.
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Apart from tax collections, fees and public service charges showed a substantial increase in contrast to the drop in government property earnings which were due to lower profits declared by the Bank of Spain.
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Central government non-financial spending rose by 7.9% to reach 80.64 billion euros. This figure does not include the cross-entry for those revenues corresponding to the tax segments ceded to the autonomous communities. The increase in spending applied both to current transactions, except purchases of goods and services, and capital transfers, particularly real investments.
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Notable surplus in public accounts as of August.
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The central government Treasury balance as of August, that is to say, the difference between revenue and non-financial spending, was positive in the amount of 2.41 billion euros and thus a turnaround from the negative figure for the same period last year. This balance, added to the sharp net decrease in financial assets, gave rise to a surplus of 8.66 billion euros. In terms of National Accounting, the budgetary balance was also positive in the amount 7.38 billion euros, well above the figure for the same period in 2004.
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