1) Intentions of 1994 fiscal policy towards a balanced state budget
2) Net government indebtedness to the banking sector falls by the end of September
3) At the close-September state budget run a surplus of CZK 13.8 bn, clearing excluded
4) Tax incomes fulfilled to 73% of the budgetary intention
5) Vat decline of approximately CZK 11 bn
6) Fulfilment of income tax of juridical entities lag slightly behind
7) Total expenditures drawn under the yearly aliquot
8) In 1994 the share of budgetary expenditures of GDP declines compared to last year
1) The main targets of the medium-term fiscal policy are the maintenance of a stable economic environment, the gradual reduction of direct taxation of entrepreneurs and households, a lowering of the share by budgetary expenditures of the gross domestic product and stabilization of the public debt in absolute terms. The 1994 public budgets are balanced. As in 1993, part of the budgetary expenditures is financed through funds from the National Property Fund (debt service, restitution, damage to financial institutions' property).
The economic development hitherto and the results of the budgetary performance for January to September this year indicate that governmental intentions in the fiscal area will be met by the end of 1994. From an assessment of the key items making up government indebtedness to banks it follows that the net credit to the government is significantly affected by the performance of state and municipal budgets.
2) Government indebtedness to the banking sector (net credit to government excluding foreign loans) showed a downward tendency throughout the entire period under review. According to CNB data this decline amounted to CZK 23.2 bn against the starting point (clearing excluded). This relatively high rate of decline can be attributed to the accumulated effects of a number of factors, the most important being:
- the surplus in the state budget current performance
- the City of Prague bond issue
- operations with state securities issued for debt service.
3) The growing surplus in the state budget current performance amounting to CZK 13.8 bn at the close-September, was a key factor in the decline in the government indebtedness.
The budgetary deficit is influenced by a lower drawing on budgetary expenditures than incomes collected which roughly correspond to the aliquot portion of the budgetary intention. The primary reason lies with the seasonally lower fulfillment of expenditures (especially investment and non-investment expenditures of budgetary organizations), the intensity of which increases at the year end.
The fulfillment of budgetary revenues and expenditures has been uneven throughout the year (particularly in the first half). While fluctuations in the increase in total revenues are modified particularly by the collection of tax incomes, the level of drawing on total expenditures is partially fine-tuned according to the inflow of budgetary means acquired through the General Reserve Chapter (the main part of the expenditures is obligatory).
4) The total tax incomes by the end of September were fulfilled only to 73.0% of the budgetary intention due to a lower volume of VAT and tax on juridical entities' incomes. The fulfillment of tax on natural entities' incomes has exceeded the budgetary amount (fulfillment of 106.8%), as the state budget collected the key item of this tax (interests on natural entities for 1993) as early as January. The collection of consumer taxes, customs duties and social security contributions is problem-free.
5) The most significant revenue item, value added tax (VAT) accounting for 39.8% of the budget of all taxes, is lagging behind the budgetary intention. This budgeted amount was based on revenues realized in 1993, reflecting an assumed GDP increase in 1994, and legislative changes made since January 1994. The fall in the fulfillment of this important income item amounted to approximately CZK 11 bn as of 30.09.94. This was due to various factors, in particular to an increase in exports (raising a claim for deduction), or possibly through a shift in the structure of tax rates emphasizing lower rates (for foodstuffs, etc.). A further problem consists in tax arrears and evasions existing despite more frequent controls, the reduction of receipts occurring especially in stall sales which are difficult to verify. Collection of VAT in particular months is largely unequal, due to seasonal influences caused by pre-Christmas purchases or holidays, the payment schedule of advances and the deduction of incomes. These facts contribute to fluctuations of budgetary revenues.
6) The fulfillment of income tax of juridical entities, where a relative fall at the close-September amounts to approximately CZK 4 bn, is lagging behind the budgetary intention. The high insolvency of enterprises and the slowing down in the pace of privatization are considered the most significant causes. Another negative factor is the actual postponement of tax obligation for taxpayers (unrepeated creation of a fund of provisions for several future years, an accelerated method of write-offs, etc.).
7) The drawing on total budgetary expenditures (clearing excluded) has had a seasonal nature since August, manifested in the traditional acceleration of the fulfillment of most items during the final part of the year (additionally, approximately 20% of the total expenditures should be drawn for the past two months). The fall hitherto in drawing on these expenditures against the nine month aliquot portion is approximately CZK 16.5 bn.
8) The table illustrates a lower drawing on current and capital expenditures against the nine month aliquot, caused by the seasonal development of basic expenditure items. An overall fulfillment of non-investments expenditures was reached with differing levels of drawing on specific budgetary items. According to needs proven by municipalities the state budget provided at the close-September 100% subsidies to municipal budgets. Drawings on subsidies for heat, and contributions to subsidized organizations exceed the aliquot portion (the effect of financial means granted to vocational schools). Financial means earmarked for investments are purposely directed towards the transport infrastructure, school system, health services and ecology. Their fulfillment has a seasonal nature and the financial means are usually additionally drawn as late as at the year end (depending on invoicing).
One of the basic strategic targets of the fiscal policy emphasizing a restriction of the state commitment to a market economy is the gradual reduction of the share of budgetary expenditures of GDP. In 1994, a decline of approximately 1.1 percentage point in the share of public budgets is expected. The share of state budget expenditures of GDP is illustrated by the graph on the previous page.