State Budget Profits Much Higher than Expected Skip to content

State Budget Profits Much Higher than Expected

Earnings and expenses of the state budget for 2007 were underestimated; the state will have ISK 30.8 billion (USD 497 million, EUR 350 million) in excess by the end of this year, Minister of Finance Árni M. Mathiesen said at parliament yesterday while presenting the finance bill for 2008.

“While the current expansion in the economy remains, I think it is excellent news that the state budget is operated with handsome excess profit,” Vilhjálmur Egilsson, managing director of SA-Confederation of Icelandic Employers, told Morgunbladid.

Egilsson suggested the excess profits should be saved for a rainy day. “Because it is not certain that we will always be as fortunate. If it looks like a recession in the economy is around the corner it would be wise to use this money to prevent a downswing.”

Earlier estimates did not expect this excess fund – on the contrary, a deficit of ISK 4.9 billion (USD 79 million, EUR 56 million) was predicted, Fréttabladid reports.

According to the finance bill, reasons for these unexpected profits include a higher capital gain for the state due to rising property prices, and income tax for individuals, social security tax, import tax and value-added tax increased more than was expected.

Next year it is estimated that the state will earn ISK 72 billion (USD 1.2 billion, EUR 819 million) more than earlier expected, and although the state’s expenses will be ISK 15 billion (USD 242 million, EUR 171 million) higher than stated in earlier estimates, the state will still be left with ISK 66 billion (USD 1.1 billion, EUR 751 million) at the end of 2008.

According to earlier estimates, only ISK 9.1 billion (USD 147 million, EUR 104 million) should be left at the end of 2008.

Higher expenses in 2008 will be caused by, among other things, increased involvement in tax collection, increased contributions to the Local Authorities Equalization Fund and counter measurements in relation to the cut in cod fishing allowances.

The 2008 finance bill includes for the first time, since the US Naval Air Station was evacuated one year ago, expenses for defense issues, ISK 553 million (USD 8.9 million, EUR 6.3 million) in total.

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