Law on execution of 2006 public budget adopted

Last week a plenary meeting of the Azerbaijani Parliament adopted a law on Execution of the 2006 Public Budget.

The Minister said that the 2006 public budget made up AZN 3.869mln as compared to the forecasted AZN 3.837mln amid the execution of the budget by 100.8% and a rise by 1.8% as compared to 2005 (88.2%). Special weight of the budget incomes in GDP increased 4.5 times and constituted 21.8%.

The Tax Ministry executed the budget forecasts by 101.7%, or 87.1% (AZN 1.2bln) more as compared to 2005. Of the funds, 30.5% (AZN 812mln) falls to nine big taxpayers. It is AZN 175mln, or 27.4% more than 2005.

Despite inconsiderable rise in budget incomes though taxes, there is tax potential and additional measures should be done for attraction of taxes to the public budget.

The State Customs Committee implemented the forecasts by 102.1%, or AZN 140mln more than 2005 and remittances to the public budget made up AZN 516mln. The incomes increased by 54% as compared to 2005 and expenses 68%. The surplus of the aggregate budget was AZN 125mln.

Without consideration of income from the State Oil Fund of Azerbaijan (SOFAR), the budget was finalized with a deficit of AZN 861mln, which was reduced by 2.1% in the GDP as compared to 2005.

The non-budget remittances by the state organizations constituted AZN 66mln last year. Despite considerable increase of budget income, there is still tax potential and additional measures should be taken while attracting taxes to the public budget.

The dependence of the Azerbaijani public budget from the oil sector weakens gradually. The special weight of the State Oil Fund of Azerbaijan in the formation of the budget incomes decreased from 11% to 10.4%. Transfer by SOFAR to the public budget comprised AZN 585mln.

In its turn, in 2006 the State Oil Company of Azerbaijan (SOCAR) transferred AZN 734.7mln to the public budget, AZN 189.7mln more as compared to 2005. So, the oil factor remains to be leading in the Azerbaijani economy, while high oil prices promote significance of oil incomes. For the time being 42% of budget incomes are formed at the expense of the oil sector.

Execution of public budget in 2007

Articles 2007 Special weight, in % In respect to January %
Fulfillment in mln manats In total In GDP
Incomes in total 3 869 100,0 21,8 188,2
Including:
Income taxes from population 378,5 9,8 2,1 119,2
Profit taxes 994,5 25,6 5,6 2,8 раз
Land taxes 18,5 0,5 0,1 120,9
Property taxes 55,8 1,4 0,3 138,1
VAT 737,8 19,0 4,2 123,0
Excises 187,4 4,8 1,0 132,9
Tax for natural wealth 100,2 2,6 0,6 187,3
Taxes linked with foreign economic activities 241,2 6,2 1,4 117,5
Including:
Import duties 138,6 3,6 0,8 137,9
Non-tax incomes and duties 434,9 11,4 2,5 -
Other incomes 715,2 18,5 4,0 -

Source: State Customs Committee and Finances Ministry

The 2006 public budget expenses made up AZN 3.790mln as compared to the forecast of AZN 4.025bln amid the execution of the public budget by 94.2%. Expenses increased by AZN 1.649mln, or 77.1% as compared to 2005, while their special weight in the GDP rose 3.4% and comprised 21.4%.

Expenses for industry and construction rose 5.4 times in 2006, defense - 2.2 times, economic activities - 80.3%, housing and communal economy 54.9%, health 40.6%, youth policy and sports 39.7%, agriculture and forestry, fisheries, and environmental protection 37.2%, court systems 35.1%, culture and arts 31.9%, education 28.6%, and production of social security 12%.

Some 26.9% of expenses were spent on construction and overhaul, or 4.3 times more than 2005, 24% salary fund (up 61%), 2.6% expenses for reserve funds (3.4 times).

Initially, the 2006 public budget included advance rise of expenses, providing for economic development and defense capability. Leaders on the growth rate were capital expenses, which as compared to 2005 were to increase 2.6 times. The public investment expenses with are part of capital expenses, were to increase 2.5 times. The state investments within the target programs were designed for the reconstruction of major automobile routes, construction of the Baku circular automobile route, construction of schools, sports complexes, water and sewage systems, construction of new gas-steam devices in Sumgayit and North power grid and 52 module power stations.

Articles 2007 Special weight, in % In respect to January %
Fulfillment in mln manats In total In GDP
Incomes in total 3 869 100,0 21,8 188,2
Including:
Income taxes from population 378,5 9,8 2,1 119,2
Profit taxes 994,5 25,6 5,6 2,8 раз
Land taxes 18,5 0,5 0,1 120,9
Property taxes 55,8 1,4 0,3 138,1
VAT 737,8 19,0 4,2 123,0
Excises 187,4 4,8 1,0 132,9
Tax for natural wealth 100,2 2,6 0,6 187,3
Taxes linked with foreign economic activities 241,2 6,2 1,4 117,5
Including:
Import duties 138,6 3,6 0,8 137,9
Non-tax incomes and duties 434,9 11,4 2,5 -
Other incomes 715,2 18,5 4,0 -
Articles 2007 Special weight, in % In respect to January %
Fulfillment in mln manats In total In GDP
Expenses in total: 3790 100,0 21,4 177,1
Including:
State expenses 403,1 10,6 2,3 2,4 р
Including:
Memberships fees to the international organizations 8,2 0,2 0,05 154,7
Maintenance of legal authorities, law-enforcement bodies, security and prosecutor bodies 278,5 7,3 1,6 134,9
Education 479,0 12,6 2,7 128,6
Healthcare 161,9 4,3 0,9 140,4
Social security and social provision 341,5 9,0 1,9 112,0
Culture, arts, physical culture, and religious activities 67,1 1,8 0,4 132,3
Economic expenses 1246,9 32,9 7,0 2,8 раз
Of them:
Communal economy 61,5 1,6 0,3 154,9
Agriculture, forestry and fishery 132,4 3,5 0,7 137,2
Industry and construction 882,9 23,3 5,0 5,4 раз
Transport and communications 82,8 2,2 0,5 85,0
Other expenses 811,7 21,5 4,6 169,9

Source: State Customs Committee and Finances Ministry

Assignments out of the reserve fund of the 2006 public budget in expenses made up AZN 23.5mln. The funds were distributed in the following way:

- AZN 3mln prophylactics with bird flue;

- AZN 1.2mln - coastal fortification of Dulchan and Balakan rivers;

- AZN 1.3mln - removal of results of landslide in the territory of Mingechevir water reservoir and Khanlar District;

- AZN 1.2mln - expenses linked with the organization of the 2nd conference of world Azerbaijanis'

- AZN 1.2mln - organization of new, re-run and by-elections to 604 municipalities.

And about surplus. It made up AZN 79mln in 2006. Meanwhile, Ziyad Samedzade, the chairman of the permanent parliamentary commission on economic policy, related major reason for formation of a public budget surplus with incomplete use of some budget funds. He noted that the forecasts in wages were not implemented in some spheres. Moreover, the number of employees in some organizations was less than it was projected in the staff list and the vacancies were not fulfilled. As a result, the funds were saved. High oil prices also played considerable role in the formation of the public budget surplus.

At the end, the budget expenses per capita incomes grew from AZN 254 in 2005 to AZN 445 in 2006, whereas per capita GDP rose from AZN 1,488 in 2005 to AZN 2,078 in 2006.

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