Ukraine general budget revenue jumps 19% in May

Ukraine’s general budget revenue jumped 18.8% yoy in May from a 4.2% yoy decline in the prior month, the State Treasury reported on June 29. For 5M16, general budget revenue increased 12.2% yoy.

In May, general budget collections reached UAH 61.0 bln from UAH 51.3 bln a year ago. Spending increased 18.0% yoy, still slowing from 20.8% yoy in April. Strengthened collections improved the fiscal balance. As a result, general budget was reported at a UAH 1.3 bln surplus for the month from a UAH 8.9 bln deficit in April (UAH 3.8 bln deficit for 5M16). The central budget deficit narrowed to UAH 4.3 bln in May from a UAH 11.6 bln deficit a month ago (UAH 26.4 bln deficit for 5M16). Local budgets are still reporting impressive results, with a UAH 5.6 bln surplus in May compared to a UAH 2.7 bln surplus in April (UAH 22.7 bln surplus for 5M16).

The main reason for the fast revenue growth in May was tripled enterprise profit tax collections, which swelled to UAH 8.4 bln from UAH 2.6 bln a year ago. Other factors were a 48.5% yoy increase in excise duties, as well as 37.2% yoy growth in personal income tax. At the same time, import duties plunged 50.8% yoy, revenue from rent on mineral extraction slumped 48.0% yoy, and still there was no wire from the NBU.

Alexander Paraschiy: The State Fiscal Service changed the rules of enterprise profit tax payments this year, resulting in the nearly 60% collections surge in May. Previously, companies paid a monthly advanced payment that amounted to 1/12 of the prior-year profit and adjusted for real results at the end of the year. Starting this year, businesses were asked to switch to quarterly payments. As a result, the profit tax collections fell in January, February and April. Yet they increased in March, when 2015 tax payments were due, and in May 2016, when tax liabilities for 1Q16 were due.

The May numbers also indicate that budget collections still have strong potential, disregarding the poor results of April (when revenues fell 4.2% yoy). And the Finance Ministry has still left untouched UAH 38 bln in NBU profits that should be wired to the budget by the year end. Against this backdrop, we remain optimistic about fiscal prospects and do not see risks to the 3.7% of GDP general budget deficit limit committed to the IMF.