Ukraine budget switches to UAH 3 bln deficit in June

Ukraine’s general budget deficit switched to a UAH 3.3
bln deficit in June after a UAH 13.6 bln surplus in May, owing to slower growth
in budget revenue, the State Treasury reported on July 27. General budget
revenue increased 14.1% yoy to UAH 99.3 bln, decelerating from a 41% yoy surge
in the prior month. Meanwhile, general budget expenditures rose 21.1% yoy to
UAH 102.7 bln in June, slowing from 43% yoy growth in May.

Tax revenue improved 17.1% yoy while non-tax revenue
grew 7.7% yoy. Receipts from enterprise profit tax plummeted 46% yoy after a
44% yoy surge in May. Meanwhile, excise taxes for domestic goods picked up 13%
yoy after a 4% yoy decline in the previous month. In addition, rental payments
for the use of natural resources surged almost three times yoy. Strong growth
in net VAT receipts continued as well, reaching 42% yoy in June.

Receipts from property income and entrepreneurial
activities inched up 3.4% yoy in June, dragging down the overall growth of
non-tax revenue. For 1H18, general budget revenue increased 14.4% yoy, while
the general budget posted a surplus of UAH 10.4 bln.

Evgeniya Akhtyrko: June’s
general budget deficit should be a warning sign for public finance managers. It
could be imprudent to maintain a high growth rate of public expenditures amid
very uneven flows coming into the budget.

In particular, the problem of large swings in
month-to-month receipts from the enterprise profit tax persists and points to
the practice of “manual” tax collection instead of an automatic regime. Weak
growth of property income and entrepreneurial activities is an indicator of a
shaky situation in small and medium business.

It is very hard for the government to lower its
appetite for public expenditures amid the evolving election campaign for the
March 2019 presidential vote. Therefore, we are likely to see growing pressure
on business on the part of tax collection services.