About CBF

The state’s tax revenues largely depend on the development of the economy. For example, household consumption has a significant impact on VAT collection; and wage and salary growth have a significant impact on personal income tax collection and on the social security and health insurance contributions. When estimating tax revenues, the Ministry of Finance first uses its macroeconomic predictions. The relationship between tax collection and macroeconomic parameters, may, however, vary depending on the stage of the economic cycle and definitely will be influenced by any changes in tax policy. Hence, the Committee must make a separate examination of tax income predictions.

It can happen. The Committee may, for example, assess the macroeconomic prediction as realistic and the fiscal prediction as optimistic. Then it is evident that it sees a problem with the tax prediction. But it is not always possible to break the deviation down in such a straightforward manner. Sometimes, the macroeconomic forecast as a whole can be assessed as realistic; nevertheless, the structure of growth may differ from the expectations of certain Committee members, which then implies a different trajectory of tax revenues. If the Committee assesses both the macroeconomic and fiscal predictions as optimistic, it may indicate a problem purely in the economic outlook (which is transferred to the tax revenue outlook), or problems in both predictions which are not directly related. Nevertheless, each of the Committee’s opinions includes, aside from a one-word assessment, also rationale which describe important aspects of the assessment.

It does not. The Committee’s mandate does not directly include examination of the expenditure side of the budget and, hence, approval or disapproval of the overall public finance deficit or sustainability. This type of analysis is performed by the Czech Fiscal Council. If then the Committee assesses a prediction of the Ministry of Finance as realistic, it does not necessarily mean that it approves the direction of fiscal policy as such. It merely confirms the fact that the Ministry of Finance’s prediction at the time of its preparation took into account all relevant data and did not diverge from experts’ expectations in either direction, i.e., that it would a priori overestimate or underestimate revenue estimates.

It does not. The set-up of specific taxes and their parameters is the political responsibility of the government. The Committee assesses only whether the Ministry of Finance’s estimates of tax revenues are in line with the current legal tax framework. he Committee does, however, take into account how far along in the legislative process are planned tax changes that would affect tax revenues and whether they should or should not be included in tax revenue estimates.

Macroeconomic forecasts are always subject to many risks that may or may not materialise. It is, however, substantial that all information available that is relevant for future development be used in the preparation of a forecast. Economic developments can always change due to unexpected events, as evidenced by the recent outbreak of the coronavirus pandemic, but the prediction should reflect the most likely development at the time it was made. If the Committee assesses a Ministry of Finance prediction as realistic and the economy subsequently actually develops otherwise, resulting in different tax revenues, the Committee’s assessment will still serve to confirm the Ministry of Finance’s effort to create a good prediction at the time it was made, uninfluenced in either way by political motivations, for example. It will not be possible to attribute the differing development in tax revenues or in the entire government deficit to intention or a professional failure of the Ministry of Finance; rather, it will be, above all, the result of different-than-expected economic developments.

Committee members are, by law, appointed by the Government, but in the first place they must be nominated by the Czech Fiscal Council, which is independent. The suggestions for Committee members are purely within the Council’s purview and, hence, there is no risk of nominations being influenced.

The applicable Statute of the Committee on Budgetary Forecasts requires Committee members to be actively involved in the production of publicly published macroeconomic or fiscal forecasts on a long-term and regular basis. This condition partially limits the possibility of integrating economists from academia in the Committee’s work on a larger scale, as their practice is usually focused on narrower fields of research and they publish in that sphere, and less frequently pursue making regular predictions from the macroeconomic and fiscal environment. Furthermore, those who do make forecasts, may encounter the obstacle that their forecasts are not always formally published on their institutes’ websites