Tax collection in Latvia continued to improve in August, securing 8% more to the state budget when compared to the same month of 2019, according to the report from Fiscal Discipline Council (FDP).
The council stresses that collection of compulsory state social insurance contributions has improved.
“This means the previous outlook, about the lowest point of tax collection having been observed in May, was correct. Residents have become more optimistic about their financial state and have started making purchases they had previously put off during the crisis, improving collection of consumer tax and other taxes in the process,” admits FDP.
The council also says that in spite of improvement of tax collection in the past couple of months, the tax collection plan for 2020 will not be completed in full. For example, the VAT tax plan has been completed 86.1%, excise tax plan – 87.3% and the corporate income tax – 76.3% in the first eight months of 2020.
Personal income tax plan, according to FDP, has been unexpectedly exceeded by 2.3%, whereas the plan for compulsory state social insurance contributions has been completed only by 93.2%.
“Generally, the tax collection process is good. This can be considered as another sign of the economy recovering,” the council notes.
FDP reports Finance Ministry has reviewed the effect term extension for tax payment terms during COVID-19 pandemic could have on the state budget balance in 2020. It is concluded that the tax payment influence is considerably smaller (EUR 139.9 million) than the previously estimated EUR 331 million. Finance Ministry expects the taxes the payment of which was extended will improve budget balance by EUR 38.4 million in coming years.
At the same time, fiscal discipline supervisors say that opposite to tax collection, where improvements are observed, the dynamic of the state budget expenditures remains unclear.
“Although a considerable increase is observed for expenditures because of state support measures, the general expenditures increase level is not equal across monthly reports. It is affected by the fact that support measures are not financed equally. In August we also received small returns for the state budget from the European Union – only 31.9 million,” FDP admits.
The council concludes that generally the balance of the base and special budget can be considered adequate for the state of emergency. According to the State Treasury’s data, the balance of the state base budget was negative EUR 216.3 million at the end of August (surplus of EUR 227.9 million in August 2019). The balance of the special budget was EUR 27.9 million at the end of August 2020, whereas a year prior it was EUR 234.5 million. (BNN/Business World Magazine)