In January-September, with reduced economic activity, general tax revenue was EUR 573.7 million or 8% short of the plan, as reported by Finance Ministry.
In the first nine months of 2020, consolidated budget revenue was EUR 22.7 million or 0.3% lower when compared to the same period of 2019, reaching EUR 8,418,400. General budget revenue suffered a decline because of lower tax revenue, with COVID-19 pandemic impacting the economic situation in Latvia and the world, the ministry explained.
General budget revenue when compared to January-September period of 2019 increased by EUR 669 million or by 8.4%, reaching EUR 8,588,600. The increase of expenditures was dictated by previously planned additional expenditures on objectives like pensions and other social benefits, wage increase for healthcare workers and other sectors, as well as the government’s approved measures to support the national economy and prevent consequences from COVID-19.
To ensure the spread of COVID-19 were controlled, the government adopted restrictions in March. These restrictions have since had a major impact on economic activity in nearly all sectors, which caused GDP to decline by 8.9% in Q2.
Such a rapid decline in the economy had a significant impact on general budget tax revenue in Q2, which declined by 9.7% YoY. In Q3, an increase of economic activity and general budget revenue recovery was observed, with tax revenue exceeding that of Q3 2019 by 1.4%. Additionally, in Q3 there was an 18.6% increase of general budget tax revenue when compared to Q2, when COVID-19 influence on the economy was the most obvious, the ministry notes.
Nearly all tax revenue is behind the plan. The only exception is PIT, collected in EUR 41.5 million or 3.3% above the plan. This can be explained with the rapid completion of the plan in January-February, which came from growing labor income level at the beginning of 2020, when the situation with COVID-19 was not yet as severe as now.
The biggest lag is observed with general budget revenue from VAT. The state budget collected EUR 284.3 million or 13.5% less than planned. VAT revenue suffered the biggest decline when compared to nine months of 2019, which was EUR 105.8 million or 5.5%. The biggest VAT revenue decline was observed in the construction, real estate, accommodations and catering services sectors.
Excise tax revenue, following a decline of consumption of excise goods, was EUR 109.6 million or 12.2% lower than planned. Revenue also declined by EUR 14.3 million or by 1.8%. The biggest decline was observed for excise tax revenue from alcoholic drinks – by EUR 10.9 million. This was largely caused by the ceased alcohol trade along the border during the state of emergency.
According to data from the State Employment Agency (NVA) the registered unemployment level in Latvia increased from 6.3% in February to 8.6% in June because of COVID-19 pandemic. By the end of September, with the economic situation improved and thanks to seasonal factors, unemployment in Latvia declined to 7.7%. Last year’s registered unemployment level was significantly lower (5.7% in September, for example).
In the account period the state base budget formed a considerable amount of deficit (EUR 335.3 million), whereas last year there was a surplus of EUR 128.6 million in the same period.
In all other sub-levels of the general budget there was a surplus in the first nine months. (BNN/Business World Magazine)