Latvia completed this year’s six-month tax revenue budget plan by 100.6%, exceeding the previously planned revenue by EUR 22.9 million. Compared with the first half of 2015, tax revenue has increased by EUR 183.3 million or 5.4%, where the largest increase was provided by labour tax, VAT and excise tax revenue.
Budget revenue in total was EUR 4,555,100 million, which is 31,000,000 or 0.7% less in comparison with the first six months of the year before. The decline is mainly due to significantly smaller state budget revenue from foreign financial sources, which were EUR 219.8 million or 30.6% lower in comparison with the year before. The investment activity of European funds for the 2014-2020 planning period is not intensive enough to match the level of previous years. The state budget’s expenditures were on the level of the previous year – EUR 4,369,000. As a result – the surplus of the consolidated state budget declined by EUR 31.3 million due to lower revenue in the first half-year and was EUR 186.2 million, as reported by Finance Ministry.
The state budget’s non-tax revenue was collected on the level of 2015 – EUR 289.8 million. Nevertheless, there is still a lack of completion for certain non-tax forms of revenue. This applies to road fees (collected in the amount of EUR 8.6 million, which is equal to 69.8% of the previous level).
VAT tax revenue was collected in the amount equal to 99.5% of the planned amount (EUR 956.2 million). Compared with six months of 2015, VAT revenue grew by EUR 42.7 million or 4.7%. This was provided by the decline in repayments of VAT.
Revenue from personal income tax was collected in the amount of EUR 723 million, which is EUR 14.6 million or 2% lower than planned. The main reason for the failure is related to the moderately increased repayments which are carried out based on submitted annual declarations. EUR 59 million were repaid in the first six months of 2016, which is EUR 22.3 million or 60.8% more in comparison with the same period of 2015. The increase in repayments can be explained with partial automation of the PIT repayment process.
Good completion is noted in excise tax segment, in which the state budget collected EUR 408.6 million, which is EUR 17.9 million or 4.6% more than was initially planned. Compared with the same period of 2015, revenue has grown by EUR 33.9 million or 9%. The rise in revenue is mainly related to the rise in consumption of diesel fuel and tobacco products.
The state special budget’s expenditures for social benefits continue to rise. Their more rapid growth is associated with larger expenditures for sickness, unemployment and parental benefits. Growth of the average size of benefits continues since 2015, when amendments to legislation were added to lift the restriction on the size of benefits. The process is also influenced by the rapid climb of minimum wages.
A major increase was noted in expenditures for subsidies and grants – by EUR 133.5 million or 16.2%. This mainly applies to state budget subsidies and grants provided to entrepreneurs, including EUR 59.2 million allocated to Public Energy Trader in order to partially compensate the cost of mandatory procurement component and the increase of EUR 60.3 million in payments to farmers. Healthcare expenditures have grown EUR 20.3 million in comparison with the first half-year of 2015.
The increase of expenditures in the aforementioned budget position was compensated by significantly smaller capital expenditures, which, compared with the first six months of 2015, declined by EUR 128.3 million or 41.5%. This can be explained with the end of the previous planning period and start of preparations for the realization of the next planning period’s intended projects for the second half of the year. There were also smaller expenditures in relation to the state debt maintenance, which declined by EUR 47.3 million in comparison with the year before. This is largely related to the fact that the last interest payment for the EUR 1.2 billion loan provided by the European Commission was paid back in January 2015.Expenditures in relation to payments to the European Union budget were EUR 48.6 million or 29.8% lower in comparison with the level of expenditures of 2015.