Thanks to a positive development of the country’s national economy, a better tax revenue completion, as well as higher foreign money income and larger non-tax revenue volume ensured a significant surplus of funds in the State consolidated budget. However, the surplus of the municipal budget is dropping as a result of the active realization of EU projects.
According to the data from the State treasury regarding the base budget’s completion in the first seven months of 2012, budget surplus based on money flow methodology was 176.6 million LVL or 1.2% from GDP. The consolidated budget’s completion improved by 419.9 million LVL when compared with the first seven months of 2011.
Successful tax revenue contributed to good fiscal results, as did the reception of the delayed EU payments and income from dividends. This year’s seven month consolidated budget’s income completion was 58% from the year plan and municipal budget completion formed 65% of the year plan. Meanwhile, consolidated budget expenses increased by 2.1% compared to the same period of 2012, and they fully comply with this year’s expense plan, Finance Ministry (FM) reports.
A significant part of this year’s seven month consolidated budget revenue (76%) was made up of tax revenue. The total tax income, including the deposit funded pension scheme, increased by 13.0% in January-July period of 2012 and were 2 505.0 million LVL. Good retail trade turnover indexes positively affected VAT revenue, and they were 107.6 million LVL higher than in the same seven month period of 2011. Nonetheless, given the reduction of the standard VAT rate by 1%, it is predicted that the increase of VAT gross contributions could decrease in the coming months.
The increase of average wages and the number of employers in the seven months of 2012 contributed to the increase of PIT and social insurance contributions by 47 million LVL and 66.1 million LVL respectively.
Surplus remained in the municipal budget in the first seven months of 2012. The largest surplus was noted in Riga city budget (22.4 million LVL), and it made up nearly half of the total municipal budget surplus. It should be noted however that this is the second month when municipal budget suffers deficit. This adversely affects the saved surplus of funds, decreasing it. The reduction of the surplus is linked to the increase of capital expenses, which has been noted since April this year. It is also linked to the realization of EU projects. Increase of capital expenses is expected to continue in the coming months. This is not something unexpected – similar tendencies were noted in previous years as well, FM notes.
Municipal budget revenue was 803 million LVL in the January – July period of 2012, an increase of 3.6% compared to the same period of 2011. In general, municipal budget revenue development tendencies remain the same.
Municipal budget expenses, on the other hand, formed 753 million LVL in this year’s January-July period, which grew at a slower pace than revenue – by 2.8%.
Given that 2012 budget amendments include additional expenses, as well as changes for the tax policy, FM predicts that that overall government budget deficit’s goal in 2012, which is set at 1.9% from GDP in accordance with the European account system methodology, will be followed.