In January-November 2021, the deficit of Latvia’s state consolidated budget was EUR 1.03 billion, up by EUR 490.5 million YoY, according to data published by the State Treasury.
Considering the costs of the aid provided to reduce consequences from Covid-19 pandemic, the deficit in the state budget reaches EUR 1.08 billion. The municipal budget, on the other hand, formed a surplus of EUR 43.3 million, as reported by the Ministry of Finances.
Revenue of the consolidated general budget in 11 months of 2021, when compared to 2020, increased by EUR 1.2 billion or by 12%, reaching EUR 11.5 billion. Expenditures increased more rapidly – by EUR 1.7 billion or by 16%, reaching EUR 12.5 billion.
Tax revenue in the January-November 2021 period, including the single tax account’s undivided remaining balance of EUR 256.5 million, was EUR 9.1 billion, up by EUR 888 million or by 10.9%.
Without the undivided balance on the single tax account, tax revenue reached EUR 8.8 billion last year, exceeding the tax revenue level of 11 months of 2020 by EUR 631.5 million or by 7.7%.
In November 2021, despite tight epidemiological restrictions, the amount of tax payments exceeded those of the previous year by 7.4%.
Last year’s increase of tax revenue for the state budget was related to increased economic activity of Latvia’s residents and the increase of average wages in the country, as well as lower tax revenue level observed in spring 2020 following the first wave of Covid-19, explained the Ministry of Finances. This means tax revenue increase was especially rapid in certain months of 2021. For example, in May 2021 general budget revenue, including the balance left on the single tax account, reached a 35.1% increase when compared to 2020.
The tax revenue plan of the general state budget, aside from the single tax account’s balance, was completed 104.1% in 11 months of 2021. The surplus of tax revenue reached EUR 346.9 million. Although Latvia declared a curfew between October 21 and November 14, 2021 and activities of many businesses were severely limited, the tax revenue in November 2021 exceeded the budget plan, reaching 101.9% or EUR 15.5 million.
Increased tax revenue was observed for all tax positions, the ministry noted.
Revenue from Value Added Tax (VAT) increased by EUR 330.1 million or by 14.3% and was EUR 2.6 billion. Two-thirds of this increase came from the trade sector.
Social insurance contributions increased by EUR 90.8 million or by 3.5%, reaching EUR 2.7 billion. Personal Income Tax (PIT) revenue increased by EUR 59.1 million or by 3.6%, reaching EUR 1.7 billion. The biggest Labour Force Tax revenue increase came from healthcare, IT and ICT sectors.
Excise tax revenue has increased by EUR 32.3 million or by 3.3%, reaching EUR 1 billion. Revenue from oil products has increased by EUR 17 million and from tobacco products – by EUR 12.9 million.
The most rapid increase is observed for corporate income tax – EUR 102.3 million or 54.5% more when compared to 11 months of 2020, reaching EUR 289.9 million.
Revenue from foreign financial aid was EUR 243.7 million or 22.6% more when compared to 2020, reaching EUR 1.3 billion.
The Ministry of Finances explains that the increase of foreign financial aid is related to the advance payments of EUR 237.4 million received in September 2021 for the implementation of the European Recovery and Sustainability Mechanism, which the European Commission approved in 2020 to battle Covid-19 consequences in EU member states.
According to estimates from the Ministry of Finances, as of the end of November 2021 the volume of support provided to reduce Covid-19 consequences reached EUR 1.9 billion or 6.2% of GDP. According to data from the State Treasury, the costs of the state base budget and special budget reached nearly EUR 1.7 billion last year. The volume of state aid provided last year was the main reason for the increase of general budget costs.
The aid allocated from the state general budget to cover benefits in 11 months of 2021 reached EUR 2.6 billion. Compared to the previous year, this aid has increased by EUR 193.7 million or by 8.2%.
The ministry reported that the biggest cost increase for benefits was observed for the healthcare sector. Benefits have increased for interior affairs and defense sector workers.
The cost of goods and services increased moderately for the general state budget. In the account period these costs have increased by EUR 50.2 million or by 4%, reaching EUR 1.3 billion. The biggest increase for the cost of goods and services is observed for higher education institutions, research institutions and others, as well as the defense sector.
Grants and subsidies increased by EUR 266.2 million or by 11.6% in 11 months of 2021, reaching EUR 2.6 billion. The increase of costs is dictated by the provision of additional financing for healthcare – an increase of EUR 449.9 million or 46%. The main increase comes from transfers towards the increase of wages of medical staff.
Social payments to the state budget form more than one-third of all expenses. Last year this category of expenses increased the most rapidly among all other groups – in 11 months these costs increased by EUR 1.1 billion or by 34.8%, reaching EUR 4.4 billion. Of these costs EUR 2.3 billion were pension costs, which, when compared to 11 months of 2020, was an increase of EUR 162.4 million or 7.6%. Other benefit-related costs increased EUR 979.8 million or 86.3% and formed EUR 2.1 billion.
The cost of other benefits was related to payment of aid to entrepreneurs and residents to reduce the consequences from Covid-19, noted the ministry. According to data from the State Treasury, as of the end of November 2021 the size of social payments in the form of Covid-19 aid reached EUR 1 billion. This includes grants for enterprises to ensure assets, downtime benefits, wage subsidies and support paid to families, children and families.
Social payments also mostly consist of sick leave and unemployment benefits.
For sick leave costs the state special budget provided payments worth EUR 277.4 million, up by EUR 59.2 million or by 27.2%.
According to data from the State Social Insurance Agency (VSAA) for 11 months of 2021, the number of people receiving sick leave benefits increased by 30.1%, which was largely influenced by the spread of Covid-19 in Latvia. It is important to keep in mind that the state covers the cost of work inability from the first day of confirmed Covid-19 infection, stresses the Ministry of Finances.
The cost of unemployment benefits was EUR 110.4 million, down by EUR 32.9 million or by 23%. This is largely dictated by lower unemployment level and a lower average benefit amount and shorter benefit payment length from January, explains the ministry. According to data from VSAA, the size of unemployment benefits has reduced 8.6% in 11 months of 2021. (BNN/Business World Magazine)