Public finance 2008: Revenue increase faster than expenditure

The detailed data for these ratios is taken from Statistics Austria’s autumn 2009 compilation of public finance, as at 30 September 2009. The basis for the 2008 results have been annual public accounts for federal, state and local government units and the social security funds, respectively. A first evaluation of the numerous extrabudgetary units could also be taken into account.

88% of government revenue originates from taxes and actual social contributions, which amounted to €120.3 bn in 2008 (change rate on the previous year: +5.7%; plus €6.4 bn). The increase of taxes on production and imports was lower in relation to 2007 (4.6% compared to 5.1%) but still clearly above the ten years’ average of 3.4%. Revenue from current taxes on income and wealth exceeded the previous year’s result by 8.0% (+€2.9 bn). Actual social contributions, which essentially comprise pension, unemployment, health and accident insurance contributions, increased with the highest rate since 1995 (4.6%). In 2008, total revenue of sector general government (€ 136.5 bn) increased by 4.7% or €6.1 bn, respectively.

In contrast, government expenditure rose slower. It totalled to €137.9 bn in 2008 (+4.3% or €5.7 bn, respectively). 48% of government expenditure is in respect of social expenditure – this comprises monetary benefits (such as pensions, family allowance and unemployment benefits) and social transfers in kind (e.g. doctor’s and hospital payments). Social expenditure increased by 5.0% in 2008. The second largest expenditure item is compensation of employees (gross wages and social contributions) for public employees (+€4.4 bn, +1.1% on the previous year). Above average intermediate consumption (10.8%, €1.3 bn,), subsidies (10.0%, €0.9 bn) and gross fixed capital formation (12.0%, €0.3 bn) rose. As regards intermediate consumption one has to mention that the purchase of military goods – like the fighter aircrafts in the years 2007 to 2009 – are also included under this item. Due to the accrual concept in National Accounts the time of delivery is of relevance. Interest on the government debt decreased substantially, for the first time since 2003, by 5.6% (€0.4 bn). This has, however, to be seen together with the strong decrease on the interest revenue side (-€0.7 bn).

Comparing the structure of government expenditure by functions between 2007 and 2008 the share of “General public services” decreased substantially (1.0 percentage points), the shares of “Recreation, culture and religion” (0.2 percentage points), “Environment protection” and “Housing and community amenities” slightly (0.1 percentage points each). On the other hand the shares of the following groups increased: “Economic affairs” (+0.5), “Defence”, “Health” and “Education” (+0.3 percentage points each).

The difference between government revenue and expenditure according to National Accounts’ concepts is net lending (+)/net borrowing (-) (2008: -€1.5 bn). For the calculation of the Maastricht indicator government deficit the flows on swaps and forward rate agreements are taken into account as interest payments/revenues; result for 2008: -€1.3 bn.

The following structural changes in government revenue and expenditure between 2007 and 2008 have to be taken account when analysing of the data: A new tax sharing system (higher tax proportion and lower transfer revenue of state and local government units) and the change in the system of family allowances for government employees from funded to unfunded.

Quarterly data

Since September 2003, quarterly results for all non-financial transactions and for net lending and borrowing – starting with the 1st quarter of 2001 – have been published nationally.

The following quarterly pattern can be seen in revenue and expenditure for the general government sector:  
Quarterly net lending and borrowing shows a strong deficit in Q1, then increases in the course of the year and achieves the highest surplus in Q4. This pattern results primarily from the pattern of the revenue curve, which has a very similar run, whereas the expenditure curve shows high values in Q1 and Q4 and low values in the middle quarters.

The increase in revenue in the course of the year is, in detail, largely attributable to a number of key taxes (mineral oil tax, capital yields tax on interest, income tax and corporation tax). The run of the expenditure curve is determined primarily by the high interest expenditure of the central government in Q1 and by the high values for intermediate consumption, investments and investment grants in Q4.

The quarterly data for the general government sector can be used both to identify seasonal patterns and, above all, as a short term indicator for the annual accounts of the current year:  
The development of net lending and borrowing, for example, is already evident in the second quarter and can be clearly predicted in the third quarter since the public surplus of the fourth quarter remains relatively constant in the time curve.

This effect is due to the revenue from value added tax, wage tax and corporation tax, with the total of these three taxes in the middle two quarters being a good indicator of the net lending and borrowing expected for the current year.