First-half state earnings surpass anticipated budget figures
In a recent government meeting chaired by the Prime Minister, Minister of Finance Madі Takiіv presented the results of revenue execution for the first half of 2025. The state's budget revenues amounted to an impressive 11 trillion tenge, marking a significant increase from previous years.
This growth was primarily driven by the strong performance of personal income tax (IPT) collections, which saw a 10% increase compared to the FY24, despite a 9.5% decline in corporate income tax revenue. This surge was partly due to a "true up" by the Department of Revenue, which reclassified some business-related income tax revenues into the personal income tax category.
The robust revenue growth contributed to the state closing fiscal year 2025 with a record $54 billion, exceeding the original budget projection of $53.3 billion by $717 million. This growth aligned closely with budget forecasts and allowed for balanced fiscal planning for FY26 without accumulating substantial surplus funds.
However, the economic landscape nationally presents mixed signals. The U.S. economy's first-quarter 2025 GDP contracted by 0.5%, reflecting increased imports and decreased government spending. Despite this, consumer spending and private investment still grew, offering a partial offset. At the state level, tax revenue trends varied, with some states seeing over 9-10% increases, while others experienced revenue declines, influenced by factors such as state tax cuts.
Despite these uncertainties, the unexpected revenue surplus has helped stabilize the state budget, enabling ongoing funding for government programmes without relying on deficits or major cuts. The growth in personal income tax receipts indicates stronger personal incomes or employment in the state, which can have positive multiplier effects on consumer spending and economic activity.
However, state officials remain cautious, recognising that federal support may decline and GDP growth is weak nationally. This implies that sustained economic support at the state level depends on both local economic performance and federal policies.
Additional revenues of 492 billion tenge were ensured due to measures on digitalization, analytical selection, and control. The dynamics of the revenues are due to the simplification of returns and prioritizing the consideration of exporters' applications. Madі Takiіv stated that the increase in revenues is a real influx of liquidity into the economy, supporting exporters, producers, and farmers.
Local budget revenue execution was at 117%, with the volume of VAT refunds amounting to 768 billion tenge, 12% more than last year's level. The plan for local budgets was exceeded due to IPT, CIT, and social tax. Local budgets showed confident growth, with the excess in the republican budget primarily due to VAT on imports, ETPS on raw oil, and CIT.
In summary, the state's first half of 2025 achieved growth in budget revenue primarily through increased personal income tax collection aided by revenue reclassification, helping the state achieve record revenues that bolstered fiscal stability as national economic indicators showed mixed signals. The increase in liquidity supports exporters, producers, and farmers, contributing to the overall economic confidence and stability of the state.
- The growth in budget revenue was mainly due to an increase in personal income tax collections, which saw a 10% increase compared to the FY24, partly because of the reclassification of some business-related income tax revenues into the personal income tax category.
- The unexpected revenue surplus, amounting to 492 billion tenge, was ensured due to measures on digitalization, analytical selection, and control, helping to support exporters, producers, and farmers by providing a real influx of liquidity into the economy.
