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Economy

More than 50 percent of the budget revenues will fall to the oil sector

More than 50 percent of the budget revenues will fall to the oil sector

In 2023, it is predicted that the revenues of the state budget of Azerbaijan will be 30 billion 774 million manats, and the expenditures will be 33 billion 353 million manats.

This means an increase of revenues by 5.4 percent and expenditures by 3.2 percent compared to the indicators of 2022.

Fakt Yoxla made a comparative analysis of the state budget of the last two years.

As last year, transfers from the State Oil Fund (SOFAZ) will be the main source of revenues in the formation of the state budget in 2023.

It is predicted that 36 manats and 70 gapiks of every 100 manats that will be included in the budget during the year will come from the SOFAZ.

This year, the volume of the projected transfer from the SOFAZ to the budget has decreased by about 2 percent. It should be taken into account that in the 2022 budget, one barrel of oil was calculated at 85 dollars, and in 2023 at 50 dollars. This indicator may change if energy prices are higher than 50 dollars during the year.

Note that 50 dollars include only the direct part of energy revenues. Because the energy companies operating in the country also pay taxes on the profits they earn at the expense of oil and gas. If we take into account these indirect revenues, about half of the country's budget is formed due to oil and gas revenues.

In the opinion of the Chamber of Accounts for 2023, it is also mentioned that 16,297.0 million manats or 53.0% of the state budget revenues will fall to the oil sector.

It is predicted that 11,280.0 million manats of the revenues in the oil sector will fall to the share of transfers from SOFAZ, 1,650.0 million manats to the taxes paid by SOCAR, 492.0 million manats to the profit tax obtained from the Production Sharing Agreements concluded with companies operating in the oil and gas sector, 2,875.0 million manats to the profit tax on the export of natural gas produced from the Shah Deniz field.

 

In the state budget of 2023, the second-largest source of revenues is the profit taxes to be paid by legal entities. It is predicted that 6 billion 417 million manats will be received in the budget through this type of tax during the year. This is 20.9 percent of all budget revenues.

In comparison with 2022, there is a significant increase in revenues from corporate income taxes. The government predicted that legal entities will pay 21.3 percent more profit tax to the budget than last year. According to the opinion of the Chamber of Accounts, it is known that the increase in profit taxes is related to the forecast of collecting more profit tax from oil companies in 2023. Therefore, profit tax has become the direction of the budget, which is predicted to have the second most revenue.

In the last year's budget, after the transfers from the SOFAZ, the second most revenue was predicted for value-added tax (VAT). The forecast for personal income tax in the 2023 budget is equal to 1 billion 680 million manats. This year, the government predicts a 13 percent increase in income tax receipts.

The third-largest source of revenues in the 2023 state budget is VAT. During the year, 6 billion 42 million manats are expected to enter the state budget through this type of tax. This is 19.6 percent of the total budget revenues. It should be noted that VAT is considered an indirect tax. Consumers are the payers of this tax added to the price of the product. In the 2022 budget, it was predicted that a total of 5 billion 719 million funds would enter the budget due to the additional income tax. The government has planned to collect 6 percent more VAT this year.

It is predicted that customs duties in 2023 will be 4 percent higher than last year, excise taxes will be 8 percent higher, and the funds obtained from paid services provided by budget organizations will decrease by 13 percent. The share of customs duties and excise revenues in these three directions in the budget remains almost the same. The total share of revenues from paid services provided by budget organizations in the budget will decrease relatively. The 7 directions mentioned above cover more than 90 percent of the total budget revenues.

 

Traditionally, this year, the main direction of the expenditures of the state budget of Azerbaijan is the funds allocated for construction. It is planned to spend a total of 5 billion 652 million manats from the budget on construction and urban development expenditures by the end of the year. This is about 17 percent of the total expenditure of the budget. 2 billion 650 million manats of the funds intended for construction and urban development will be directed to state capital investment (investment expenditures), and 3 billion manats will be directed to the reconstruction of Karabakh.

In the state budget of 2022, 320 million manats were allocated for this direction. However, in the middle of last year, the budget was changed because energy prices were higher than the government expected. It was after those changes that construction expenditures were slightly increased. At the beginning of 2022, the expenditures allocated from the budget for construction amounted to 4 billion 992 million manats. If energy prices are higher than expected this year, we may witness a slight increase in construction expenditures.

After the construction and urban development expenditures, the second most funds from the state budget were allocated for defense and national security. In 2023, 5 billion 331 million manats (an increase of 5 percent) are expected to be spent in this direction. Last year, 5 billion 84 million manats were allocated to defense and security expenditures. About 16 percent of budget expenditures this year will be related to defense and national security.

Education is the third most allocated direction in the state budget. In this direction, there has been a significant increase compared to 2022. So, 3 billion 887 million manats were allocated for education in the state budget last year. During this year, 4 billion 423 million manats (a 14 percent increase) are expected to be spent on education from the budget. Education expenditures make up 13 percent of the state budget expenditures.

The increase in expenditures allocated to education is related to the increase of expenditures under the section "other enterprises and measures in the field of education" by about 500 million manats. This section mainly includes student scholarships and tuition fees for students studying at the expense of the state order.

The direction for which the fourth most funds are allocated in the 2023 state budget is social protection and social security. A total of 4 billion 416 million manats are expected to be spent in this direction from the budget during the year. This is 13 percent of all budget expenditures. The funds allocated from the budget for social expenditures are approximately 700 million manats or 18 percent more than in 2022.

Two more areas that are worth noting in relation to expenditures are related to agriculture and public debt. In 2023, 20.5 percent more funds were allocated to the agricultural sector than in 2022.

Compared to last year, about 44 percent less funds will be spent on public debts from the budget this year.

During the first 11 months of 2022, the inflation rate in Azerbaijan was equal to 13.8 percent. From this point of view, although budget expenditures are supposed to nominally increase by more than three percent in 2023, budget expenditures will not increase in real terms. Because the growth rate of budget expenditures lags behind inflation.

 

Analysis
  • 11 January, 2023
  • 1644

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