Is there tax revenue fatigue?

Budget data point to March having underperformed, but the phenomenon might be a blip

months of outperformance, March tax revenues were slightly short of the budget target, perhaps signaling a return to balance and certainly justifying the government's refusal to offer any handouts at this stage, so as not to disturb fiscal stability.

According to the January-March quarterly budget execution report, published on Monday, March tax revenues were €3.611 billion, reduced by €184 million or 4.8% compared to the target. At the State General Accounting Office officials state that this lag is partly possibly due to the bank holiday at the end of March due to Easter in the West, in which case it will be compensated by the April revenue.

Overall, the January-March quarter maintained the outperformance: Tax revenues were up by €674 million or 4.7% off the target, reaching €14.92 billion. However, for the most part this outperformance is due to the better performance of the income taxes of individuals and corporations in the previous year, which were collected in installments until the end of February 2024. Some €647 million counts toward the fiscal result of 2024. Therefore only €27 million is the overperformance of the tax revenues of the quarter, which actually corresponds to 2024.

Net income in the quarter was €16.79 billion, up €398 million or 2.4% above the target. However, the target had included the collection of a tranche of €1.797 billion from the Recovery Fund, which was eventually mostly collected (€1.687 billion) in December and an additional amount of €159 million was collected in January. Therefore, net income was actually increased by €2.038 billion or 14% against the target due, as mentioned above, mainly to increased tax revenues (€654 million) which count toward the 2023 result and to increased public investment program revenues (€1.029 billion).

State budget spending was €16.867 billion in the quarter, €343 million below the target. The expenditure was reduced compared to the target by €1.007 billion, partly due to cash payments of the army procurement program.