The total budget revenue in eight months was 7.569 billion euros and the tax revenue plan was fulfilled by 91.5% in eight months, not reaching the planned by 537.4 million euros, the Ministry of Finance (MoF) informed.
The Ministry of Finance notes that due to the deteriorating economic situation, companies have been very active in using opportunities to extend tax payment deadlines this year. From mid-March to mid-September, the State Revenue Service approved extensions of € 264 million, including a three-year repayment period.
The largest non-fulfillment of the tax revenue plan in the general budget is for value added tax – by 256.9 million euros or 13.9%, social insurance contributions – by 135 million euros or 6.8%, as well as excise tax – by 100.1 million euros or 12%. , 7% and corporate income tax (CIT) – by 45.3 million euros or 23.7%.
In turn, personal income tax (PIT) revenues exceeded the planned amount by 40 million euros or 3.6%. The Ministry of Finance explained this by the high overcrowding of the plan in January-February, which was formed by the growing level of labor income at the beginning of 2020, when the situation in Covid-19 had not yet developed, as well as settlements at the beginning of the year.
The general budget received foreign financial assistance revenues (+ 1.3%) and non-tax revenues (+ 0.7%) close to the level of the previous eight months, amounting to 1.045 billion euros and 512.3 million euros, respectively.
The non-tax revenue plan in the central government basic budget in the reporting period was exceeded by 23.6 million euros or 5.7%, as higher revenue was received from dividends of state capital companies, including one share of CIT, and unplanned revenue from confiscation of criminal proceeds.
The good implementation of the PIT plan has affected the local government budget balance, the MoF pointed out. In the reporting period, the state budget had a deficit of 149.8 million euros, with the balance deteriorating by 647.6 million euros compared to the eight months of 2019. On the other hand, the local government budget had a surplus of 109.7 million euros, which was 10.6 million euros more than in January-August 2019. The Ministry of Finance notes that the improvement in the local government budget was facilitated by a decrease in expenditure on goods and services, as well as capital expenditure.
Revenues of the consolidated general budget in the eight months of this year are by 82.2 million euros or 1.1% lower than in the corresponding period last year, but expenditures have increased by 554.8 million euros or 7.9%, the Ministry of Finance (MoF) informed LETA.
Thus, in the general budget, compared to the corresponding period of 2019, the balance has deteriorated by 637 million euros.
In January-August of this year, the total budget had a deficit of 40.2 million euros, as opposed to a surplus of 596.8 million euros in the corresponding period last year. The significant changes in the MoF are explained by the impact on the economy of the restrictions imposed by Covid-19 to reduce the spread, as a result of which the total budget tax revenues fell short of the planned budget by 537.4 million euros.
On the other hand, the faster-than-planned expenditure outflow was driven by measures approved by the government to support businesses and individuals, as well as an increase in unemployment and sickness benefits.
At the same time, since the largest drop in general budget tax revenues in May (by 17.9% compared to May 2019), the situation in the general budget has improved and in August general budget tax revenues were already 3% higher than in August 2019, the MoF informed.
The total budget revenue in eight months was 7.569 billion euros, the decrease of which was explained by the MoF with lower tax revenue, which in January-August amounted to 5.772 billion euros, which is 65.3 million euros or 1.1% less than in the corresponding period last year.
The decline in revenue is observed for virtually all taxes, which were affected by the decline in economic activity and employment this year. This year alone, corporate income tax (CIT) revenues have increased significantly, reaching 145.7 million euros in eight months, taking into account that the level of CIT revenues was very low last year after the implementation of the reform (18.1 million euros in January-August 2019).
If the fluctuations of CIT revenues as a result of the reform are not taken into account, the revenues of all other taxes in the eight months of this year were actually by 192.9 million euros or 3.3% lower than in the corresponding period of 2019.
The Ministry of Finance informed that mainly tax revenues have decreased this year in the sectors most affected by the crisis – accommodation and catering services, transport and storage, arts, entertainment and recreation.
A significant decrease in tax revenues compared to 2019 is also observed in the construction sector. This is largely due to the abolition of the reverse value added tax (VAT) payment procedure for construction materials this year, which affected the increase in VAT refunds. VAT revenue in the total budget from all taxes also had the largest decrease in nominal terms, decreasing by 98.7 million euros or 5.9%.
In turn, social insurance contributions and personal income tax (PIT) revenues in the total budget were received by 33.5 million euros or 1.8% and 24.8 million euros or 2.1% lower, respectively, than in January-August last year. It was influenced by the decrease in the number of employees, the replacement of employees’ salaries with downtime benefits, as well as the increase of the non-taxable minimum and relief for dependents differentiated by the PIT, the MoF explained.
The consolidated general budget expenditure in eight months was 7.609 billion euros. Compared to the corresponding period of 2019, they have been made by 554.8 million euros or 7.9% more.
The increase in expenditures is observed in the state basic budget and special budget, but their level in the local government budget is lower than last year. In the general budget, the MoF highlights the increase in subsidies and grants by 319.1 million euros or 24.7%, amounting to 1.611 billion euros, as well as the increase in expenditure on pensions and social benefits by a total of 285.1 million euros or 13.6%, reaching 2.381 billion euros.
A modest increase, which was also planned, is observed in the general budget for reimbursement expenses. They were 43.7 million euros or 2.6% higher than in January-August last year, amounting to 1.719 billion euros.
Meanwhile, expenditures in the general budget were lower in several other expenditure groups, the Ministry of Finance informed. In nominal terms, the largest decrease was in capital expenditure, which was 58 million euros or 8.9% lower than in the eight months of last year and amounted to 593.5 million euros.
Expenditures on goods and services, including contributions to the budget of the European Union (EU), international cooperation and interest expenditures were also lower than in the general budget last year. The decrease in expenditures, especially on goods and services and capital investments, was influenced by the developments in the local government budget, the MoF explained.
Expenditures on goods and services in the local government budget have decreased by 50.4 million euros or 12.8% due to a decrease in expenditures on utilities, heating, and performing remote work in pandemic conditions.
In turn, capital expenditures in the local government budget have decreased for the performance of basic functions. This can be largely explained by borrowing restrictions, as funds can only be borrowed from the Treasury for the implementation of EU funds projects and the infrastructure of pre-school educational institutions, the MoF pointed out.
Consequently, capital expenditures for the implementation of EU fund projects in the local government budget have remained basically at the 2019 level. However, the Ministry of Finance notes that in the conditions of Covid-19, the opportunities for local governments to borrow for high-readiness investment projects, the implementation of which is planned in the last months of this year and next year, were expanded.
The increase in subsidies and grants in the general budget was influenced by the allocation of EUR 145 million to the Development Finance Institution Altum to direct its support to companies to cope with the consequences of Covid-19. There has also been an increase in subsidies and grants for medical institutions, including the restriction of Covid-19, as well as for a number of other sectors.
Expenditures on pensions and social benefits in the general budget have increased due to the indexation of pensions carried out last October, the payment of downtime benefits, as well as the increase in expenditures on short-term benefits, especially unemployment and sickness benefits, explained the MoF.
Separately, 1.538 billion euros were spent on pensions in the first eight months of the year, which was 129.1 million euros or 9.2% more than in the corresponding period last year and generally corresponds to the planned amount.
Expenditure on other benefits increased by 156.1 million euros or 22.7% in eight months, amounting to 843.3 million euros, of which 53.7 million euros were spent on downtime benefits.
There was a significant increase in expenditure on unemployment and sickness benefits, affecting the state special budget, reducing the surplus by 206.5 million euros compared to January-August last year.
Expenditure on unemployment benefits in the state special budget in January-August of this year was by 19.6 million euros or 22.6% higher than in the corresponding period last year. In fact, the increase in expenditure on unemployment benefits is even higher, given that in July, 17 million euros of unemployment benefits were paid from the state basic budget, the MoF pointed out.
According to the data of the State Employment Agency (SEA), the registered unemployment rate in Latvia at the end of August was 8.2%, but last year in the corresponding period 5.9%, the number of recipients of this benefit has significantly increased.
SEA data also show that the number of unemployed has increased in the sectors with the greatest impact of Covid-19 – accommodation and food services, transport and storage, as well as trade and other sectors. Expenditure on sickness benefits in the state special budget was made by 26.8 million euros or 20.1% more than in January-August last year, which is well above the planned level.
According to the data of the State Social Insurance Agency (SSIA), the average amount of paid benefit per day has increased by more than 10%, as well as the number of paid days per case or the duration of illness has increased by about 10%, especially starting in May. SSIA information also shows that the largest share of benefit recipients is for representatives of simple professions, which could also indicate lower access to health care for the poor.
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