Slovakia's tax revenues are projected to be 600 million euros lower than budgeted, largely due to weaker economic growth and declining wage increases.
According to a recent tax forecast from Slovakia's Ministry of Finance, the country's tax revenues for the year are expected to fall 600 million euros short of the budget estimates. This shortfall, primarily driven by slower economic growth and a lagging increase in wages, raises concerns regarding the budgetary deficit. Specifically, the deficit, previously anticipated to reduce to 4.1 percent of GDP, is now expected to reach 4.4 percent, according to the Budget Responsibility Council.
A significant factor contributing to this decline is the expected decrease in value-added tax (VAT) collection, which may fall by as much as 320 million euros compared to the approved budget. Alongside VAT, corporate tax revenues are also projected to drop by around 124 million euros. This downturn reflects broader economic challenges, as analysts predict lower returns from personal income tax and excise taxes, particularly on tobacco products.
The implications of these reduced tax revenues are substantial, as they suggest a need for adjustments in fiscal policy to address the widening deficit. The report highlights deteriorating efficiency in VAT collection and a notable decline in the number of tax audits compared to previous years, underscoring the potential systemic issues within the tax collection mechanisms of the country. Policymakers will need to respond effectively to these challenges to maintain fiscal health amid changing economic conditions.
