Compared with the first seven months of 2014, lower economic growth has impacted growth of budget revenue. Although there was a surplus of EUR 131.6 million in the consolidated budget in the first seven months of 2015, compared with the same period of last year, it has declined by half (EUR 133.5 million). The general budget’s revenue in the first seven months was EUR 5,263,700, which is 3.6% more than there was in the same period of 2014.
Larger revenue increase was secured by taxes. Expenses of the general budget in the January-July period were equal to EUR 5,131,100, which is a 6.6% increase in comparison with the same period of 2014. The largest volume of expenses has been noted for social benefits and wages, reports Finance Ministry.
The general budget’s tax revenue growth by EUR 175.8 million (4.6%) in this year’s seven months is larger than that registered in the same period of 2014. Regardless, it is lower than the one planned in the Law on State Budget of 2015. Insufficient completion of the tax revenue plan by EUR 30.7 million was due to lower VAT revenue.
Lower economic growth rates and larger term extension and VAT debt may be the reason for failure to complete VAT plan. Even though VAT revenue has grown by EUR 39 million in comparison with last year, VAT growth is not as quick as it was in previous years. For example, revenue growth rate of the first seven months of 2013 was 5.0% and that of 2014 was 8.0%.
The seven-month revenue plan has not been completed for social insurance fees as well – revenue is EUR 8.9 million shorter than previously planned.
Excise tax revenue has grown by EUR 23.3 million (5.5%) in comparison with 2014 and EUR 11.7 million larger than previously planned for this period of 2015. Larger revenue has also been noted for oil product trade. According to information from State Revenue Service for diesel fuel consumption, it has grown by 10.7% in the seven months of 2015. This can be explained with reduced retail trade prices and increase of the number of vehicles that consume diesel fuel (+15.7%).
Expenses on social benefits have growth by EUR 105.4 million (7.6%) in the first seven months of 2015. Expenses for pensions have grown by EUR 35.2 million and expenses for other social benefits – by EUR 70.2 million in the first seven months of 2015. The increase can be explained with amendments to legislation, which cancelled certain social insurance caps and increased family state support volumes for second, third and other children.
Expenses for remuneration of people employed in the public sector have grown by EUR 93.1 million. Average wages increased by 6.1% in Q1 2015, reaching EUR 785. The largest increase has been noted in the private sector (6.9%). In the public sector, average wages have increased by 5.0%, which can be explained with the rise of minimum wages from EUR 320 to EUR 360.
Rise of expenses on goods and services, which have grown by EUR 43 million in this year’s seven months, can be explained with expenses related to Latvia’s presidency over the EU Council in the first half of 2015. Higher expenses have also been noted with maintenance of Latvia’s National Armed Forces, maintenance and repairs of state roads.
There has also been an increase in capital expenses (EUR 41.5 million), which can be explained with the rise in capital investments in state budget in order to secure funding for Riga Castle and State Roads Fund.
In spite of the surplus in the general budget, it is worth remembering the annual trend usually noticed for the last months of a year. This trend leaves a serious impact on budget balance. Stable rise of expenses that exceed tax revenue growth clearly demonstrates a rise in budget deficit in the general budget, notes the ministry.