In the first two months of the Covid-19 pandemic its effect on the state budget has not yet been felt, as reported by the Finance Ministry.
In the first two months of 2020 the general budget revenue was 0.6% higher when compared to the same period of 2019. Expenditures, on the other hand, increased by 4.6%. Surplus volume in the general budget reached EUR 215.6 million and was EUR 66.9 million lower when compared to the same period of 2019.
Consolidated general budget revenue was EUR 1.994 billion, up by EUR 12.1 million or by 0.6%. Finance Ministry admitted, at the beginning of the year there was a high increase of tax revenue – 10.3%, which was related to an increase in revenue from labor tax.
Foreign financial assistance revenue, considering the large volume received at the end of 2019, has declined considerably – by 30.4%, which also affected the modest revenue increase for the general budget revenue in the first months of the year.
Latvia received EUR 308.8 million in foreign financial assistance revenue, down by EUR 134.7 million.
As foreign financial assistance revenue declines, a deficit of EUR 9.3 million formed in the state budget in the first two months, whereas last year there was a surplus of EUR 99.8 million.
The state special budget and municipal budgets, as revenue from labor tax increases, formed a surplus in the first two months of 2020 (EUR 5.2 million and EUR 32.5 million more when compared to the same period of 2019).
Tax revenue in the first two months was EUR 1.539 billion, up by EUR 143.7 million. Finance Ministry added that general budget tax revenue received in the first two months of 2020 was higher than expected.
“Tax revenue plan was completed at 105.6%, exceeding the initial plan by EUR 81.3 million. The success with the plan’s implementation came from higher revenue from PIT, which was collected at EUR 72.2 million or 25.6% above the plan. This was affected mainly by payments for company dividend payments to private persons at the end of 2019,” the ministry notes.
Revenue was also higher than expected for social insurance fees – an increase of EUR 21.9 million and real estate tax revenue increase was EUR 6.4 million, the ministry reports.
VAT revenue was collected almost at the planned volume – 99.1%. According to Finance Ministry, the budget lacked EUR 3.8 million to complete the plan. This is related to the decline of VAT in industries like electricity, gas supply, heating energy and air conditioning, as well as storage and transport assistance operations and wood processing industry.
The biggest shortage of collected funds was noted for the excise tax, where revenue was EUR 14.1 million short to meet requirements of the plan.
Similarly to 2019, less excise tax was received for oil products and alcoholic drinks.
General budget expenditures in the first two months was EUR 1.778 billion, up by EUR 79 million or by 4.6%.
Finance Ministry outlined increase of subsidies and grants with EUR 37.6 million or 12%, related to larger costs for healthcare industry’s financing, as well as higher expenditures for foreign financial assistance projects in agriculture. Capital expenditures in the general budget were EUR 9.5 million or 7.8% higher in two months of 2020 when compared to the same period of 2019.
Expenditures for social benefits were EUR 35.4 million or 6.9% higher at the beginning of 2020 when compared to the same period of 2019. Expenditures for different benefits also increased: a 14.6% increase for sickness benefits and a 23.9% increase for unemployment benefits. In Q4 2019, prior to changes for unemployment benefit payment length and amount, there was an increase of unemployment benefit issue.
“We expect in the coming months, considering Covid-19 spread, there will be an intensive increase of expenditures for illness and unemployment benefits, which will influence the situation for the state special budget, where lately there has been a high surplus level in recent years,” predicts the ministry. (BNN/Business World Magazine)