Turkey: Budget gives big surplus after increase in corporate tax

According to the November budget data announced by the Ministry of Treasury and Finance, the budget gave a surplus of 108.3 billion lira (5.8 billion dollars) in November 2022, making one of the fastest returns in recent years after a two-month deficit. In October, the budget had a deficit of 83.3 billion liras. The budget had a surplus of 32 billion liras in the same period of last year. Primary surplus, which was 47.3 billion TL in November 2021, increased to 132.7 billion TL in November 2022.

As stated in the Monthly Budget Realization Report, State revenues increased by 107.3% compared to the previous year and reached 347.7 billion TL last month. In the same period, tax revenues increased by 109.6% and reached 312 billion TL, with corporate tax at the forefront of this increase. In this period, corporate tax increased by 161.5%. On the other hand, there is a slowdown in the nominal increase rates of taxes such as income tax and internal and external VAT on consumption. The said tax items contracted in real terms (adjusted for inflation). In this period, the rate of increase in non-tax revenues was 91.5%.

Budget expenditures increased by 76.4% to 239.4 billion TL due to current transfers (+79.6%) and personnel wages (+104.4%); Adjusted for 84.4% annual inflation, it decreased in real terms. Interest expenses, which had a great impact in the previous months due to the high inflation environment, increased by 59.3% in November and reached 24.4 billion TL. In this period, it is observed that non-interest expenses increased by 78.5%, again below the inflation rate. The moderate rate of increase in this item was due to the fact that no expenditures originating from BOTAŞ or FX-protected deposits were made in November. In this period, capital expenditures increased by 75.1%, capital transfers increased by 50.2%, SGK state premium expenditures increased by 91.3%, and goods and service purchase expenditures increased by 82%.

When we look at the 2022 cumulative data; The January-November budget deficit was 20.4 billion liras, compared to the government's year-end deficit target of 461 billion liras. The budget had a deficit of 46.5 billion TL in the January-November 2021 period. These data show that the performance of the budget as of the 11-month period is more positive compared to the previous year. While the annual increase in revenues was 100.2%, the increase in expenses was 94.7%. In the 11-month period, the increase in tax revenues was 103.3%, while the increase in non-interest expenses was 98.3%. Primary surplus, which was 125.4 billion TL in the January-November 2021 period, increased to 272.2 billion TL in the same period of 2022.

Ratio of budget and primary balance to GDP (12-month cycle)… Source: Ministry of Treasury and Finance, TurkStat, Tera Yatırım

Cash budget figures for November, announced by the Treasury last week, showed a strong annual improvement due to the increase in corporate tax revenues as well as lower-than-expected expenditures. Accordingly, the cash budget balance had a surplus of 99.6 billion TL in November 2022 compared to the 30.3 billion TL surplus in November 2021. On the other hand, primary balance showed a surplus of 121.3 billion TL in November 2022, improving from 43.4 billion TL in November 2021. Looking at the details, revenues continued to increase at a strong 108% YoY increase in November 2022; non-interest expenditures increased by 83% compared to the previous year, and interest expenditures increased by 50% compared to the previous year.

It is observed that the increase in corporate tax revenues was effective in the increased budget performance. Although the details of the budget realizations in November reveal a milder inflationary effect on revenues and expenditures, it is observed that the absence of expenditures from BOTAŞ and FX-protected deposits in this month was also very helpful. On the other hand, despite the resilient course in revenues, we expect some deceleration in the coming period due to the slowdown in the economy on consumption taxes.

Under the Medium Term Program (MTP), announced at the beginning of September, the government foresees a budget deficit that will close the year at the level of 3.4% of the gross domestic product. In this respect, we can see an increasing trend in budget expenditures in December. We attach importance to interest and exchange rate developments in terms of the overall performance of the budget. We will continue to monitor these variables in terms of subsidizing the prices they affect and the continuation of the current financial/economic system.

Kaynak: Tera Yatırım-Enver Erkan
Hibya Haber Ajansı