Czech Republic Ministry of Finance Announces Budget Error Worth 60 Billion CZK

The Ministry of Finance in the Czech Republic has announced a budget error worth 60 billion CZK (approximately USD 2.8 billion). The error comes from the country’s windfall tax and excess profits tax. The state will collect 40.3 billion CZK from these taxes, compared to the 100 billion CZK expected in the approved state budget.

The state’s finance minister, Zbyněk Stanjura, has stated that the amount of money collected will be lower than expected. However, he also noted that the state should have lower expenses on compensation for high energy prices, which were the intended use for the extraordinary measure’s revenue.

According to the Ministry of Finance, the estimated revenue from windfall tax imposed on energy, petrochemical, mining companies, and large banks will fall significantly short of expectations. The approved state budget had expected to collect 85 billion CZK from the tax, but the current estimate by the Ministry of Finance is much lower, at only 28 billion CZK.

The Ministry revised its forecast based on developments in energy prices and publicly available data on the banking sector’s performance in 2022. Companies should pay the tax in September and December. Windfall tax specifically targeted state-owned ČEZ, Daniel Křetínský’s Energetický a průmyslový holding (EPH), energy group Sev.en Energy, and the six largest banks in the country (Česká spořitelna, ČSOB, Komerční banka, UniCredit Bank, Moneta, Raiffeisenbank).

The reduction in windfall tax revenue confirms some analysts’ warnings that the state could collect significantly less than expected from this tax. However, the Ministry of Finance has stated that the revised revenue estimate will not deepen the planned deficit of 295 billion CZK.

The shortfall in revenue from the windfall tax and excess profits tax may force the government to look for alternative funding sources. At the same time, the lower-than-expected payment may affect the government’s ability to fund its planned spending, which includes compensations for households and businesses impacted by high energy prices. The government has yet to announce any plans to address the budget error or how it will adjust its spending plans in response to the revenue shortfall.