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Ministry: municipalities’ expenditures increase for EU fund projects

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUIn the first half-year of 2018, a surplus of EUR 57.8 million formed in municipal budgets. This is EUR 43.1 million less than the surplus that formed in municipal budgets last year. Smaller budget surplus can be explained with intensive realization of EU projects in municipalities. As a result, total expenditures have increased by EUR 95.7 million or 8.4% when compared to the first half-year of 2017, according to information from Finance Ministry.

The ministry notes that in accordance with the State Treasury’s operative account, total municipal budget revenue in the first half-year of 2018 grew by EUR 52.6 million or 4.2%.

Tax revenue grew by eight million euros or 1% in this period. The largest tax revenue came from personal income tax and real estate tax, which historically form nearly 99% of municipalities’ tax revenue.  PIT revenue in municipal budgets has grown by EUR 7.1 million or 1.1%. Real estate tax revenue, on the other hand, has declined by 1.3 million or 0.9%, as detailed in the report.

The ministry explains that PIT was affected by multiple factors, including the tax reform, which came to force 1 January.

«The tax reform has added several important changes that have a major effect on PIT revenue. Changes include increased subsistence minimum (from EUR 380 to EUR 430), introduction of a progressive income tax, increased differentiated tax-free allowance, increased benefits for dependents and increased tax-free allowance for pensioners. To compensate tax reform’s influence on municipal budgets, a special grant is planned to be provided to municipal budgets in the first half of 2018 worth EUR 10.9 million so that their total tax revenue together with special grants form 19.6% of budget tax revenue without state social insurance fees,» the ministry explains.

The report also mentions that PIT revenue was also affected by PIT payments. «According to data from the State Revenue Service, payments worth EUR 110.9 million were performed in the first half-year of 2018. This is EUR 31.8 million or 40.2% more than last year. It should be said that the outlook detailed in the State Budget Law for PIT was not reached in the first half year of 2018. Because of that it was decided to compensate from the state budget EUR 7.8 million to municipalities in order to help them reach the required PIT revenue level.’

Real estate tax revenue declined for the first time in five years. A decline of EUR 1.3 million, which can be partially explained with State Land Service’s decision to reduce by 30% cadastral value of land used for residential buildings and which is detailed in the Cadastral Information System as cultural monument, Finance Ministry notes.

An increase of EUR 48.1 million was observed for state transfers to EU policy instruments and other foreign financial assistance projects.

Non-tax revenue declined by EUR 4.2 million or 13%, forming EUR 27.9 million. The decline is associated with land sale in Q1 2017. Revenue from paid services showed an increase of EUR 2.9 million or 4.4%, reaching EUR 67.4 million, as stated in the report.

Finance Ministry adds that total expenditures of municipal budgets have grown by EUR 95.7 million or 8.4%, reaching EUR 1.238,9 million. Expenditure increase rate is slower than it was in the first half of 2017 (14%). But it is important to keep in mind that the high growth rate of 2017 was secured by low expenditures base in 2016, especially low EU fund expenditures. In the first half of 2018, total EU fund project expenditures showed a EUR 47.5 million increase, reaching EUR 75.4 million.

«It is thanks to active realization of EU fund projects our capital expenditures have increased by EUR 46.4 million or 32.7%. The largest capital expenditures increase was secured by repair and reconstruction plans, which have increased by EUR 29.2 million,» the ministry explains.


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