The sale of alcoholic beverages on the Estonian border increases tax revenue

The rapid economic growth observed this year has resulted in a corresponding increase in general budget revenue, the "LA.lv" portal told the Ministry of Finance.

In the 10 months of this year, consolidated revenue from the general budget increased by EUR 1,108 million, or 13.9%, compared with the same period last year.

The most significant increase concerns tax revenue (€ 547.9 million or 8.3%), followed by external financial badistance revenue (€ 407.6 million or 65.1%) and non-tax revenue (129.1 million euros or 27.7 million euros). %)

The total expenditure of the general budget has now increased by 855.6 million euro or 11.1% to 8.56 billion euro.

Increased investment of EU funds, the addition of funds to the health sector and the increase of defense spending in the defense sector to 2% of the domestic product Gross Domestic Product (GDP) has an impact on the growth rate of government spending.

Larger reimbursements from the European Commission

In the ten months of this year, the consolidated general budget generated a surplus of € 514.7 million, an increase of € 252.8 million compared to the same period last year.

It should be noted that the surplus is mainly made up of the consolidated national budget (EUR 502.4 million), since the European Commission's reimbursements for the implementation of EU funds (EU ) were significantly higher than last year.

Including final payments for 2007-2013. Investments in the framework of the cohesion policy for the 2007-2013 programming period (EUR 197.4 million).

It should be noted that when moving from the badysis of the general budget to the general government budget balance according to the European System of Accounts (ESA) methodology, external financial badistance revenue is recognized only to the extent that where the expenditures for implementing external financial badistance projects are made in a given year.

In addition, the impact on the balance sheet consists solely of co-financing of state and local budgets for the implementation of projects financed by EU funds. The surplus in the general budget has been decreasing since September and it is expected that, as in previous years, spending will exceed its revenues in the last two months of the year.

According to the current evaluation of the Ministry of Finance according to the methodology of the EKS, which is to update the data of public companies, to the impact of EU funds and to d & # 39; Other adjustments, the general government budget deficit in 2018 will be 0.8% of GDP or EUR 224.7 million.

Thus, the budget deficit will be lower than the general government budget deficit (1% of GDP) authorized in the budget for 2018.

Total tax revenue will increase

Total tax revenue from the general budget increased by 8.3% over the ten-month period, also influenced by a 1 percentage point increase in the social insurance contribution rate, which allowed for a transfer of funding. health care at 70.1 million euros.

The favorable economic situation was ensured by an increase in the employment rate. According to the 3rd quarter data, the proportion of the working population in the entire working-age population was over 70%, while the average earnings had increased by more than 8%.

Thus, social security contributions in the general budget increased by 299.6 million euros, or 16.2%.

On the other hand, personal income tax revenues (income) increased to a lesser extent by 24.9 million euros or 1.8%, which is influenced by the gradual increase in the level of income tax. untaxed minimum of tax-free differentiated minimum, dependent and retired allowances by reducing income inequality.

The increase in the above facilities creates a negative fiscal effect on IRP revenues, largely offset by economic growth and measures to improve tax administration.

The municipalities that generate the largest share of IRP revenues increased their total revenues by 7.2% over ten months, which is significantly higher than the increase in IRP revenues.

It should also be noted that, in the last quarter of the year, it is established that municipalities are in arrears with the payment of IPS revenue.

It will be offset by the portion of the PPI payable to the core budget of the central government to the extent that the actual tax revenues of local government budgets, as well as the special grant, would rise to 19.6% of the actual income of the general budget, without exceeding the revenue revenue forecast specified in the State Budget Law for 2018.

The execution of the IIN over a period of 10 months allows us to predict that the fourth quarter's IG revenues will be achieved.

Growth in consumption, economic activity

Economic activity and the increase in the purchasing power of the population, which contributed to the rise in consumption, as well as the rise in the price level (3.2% in October) have resulted in a significant increase in revenue from value added tax (VAT) and excise duty.

VAT receipts increased by € 200.5 million, or 11.1%, over the ten months of this year, largely as a result of the package of measures to improve the administration, the underground economy and extension of the base introduced as part of the tax reform.

Excise tax revenues increased by 106 million euros, or 14.1%, which is also affected by the increase in excise products this year. At the same time, it should be noted that there has been a reduction in the amount of corporate income tax (UIR).

In the first ten months of this year, they were reduced by € 67.8 million, 18.9% less than the previous year, which was already foreseen and explained by the transition to a new system. IPU, in which one of the most important revenue measures was the abolition of this year's down payments. July

In general, tax revenues have been collected in the general budget at the expected level, but differences in the types of taxes are observed. To badyze the most important tax revenues of the project, it is necessary to focus on the formation of basic excise tax revenues (9.9 million euros or 1.2%), although the difference between the types of goods specified is different.

Trade in the Estonian border area contributes to tax revenues

The increase in domestic consumption contributed to the excise tax revenue on alcoholic beverages and the over-execution of the 16.9 million euro beer plan, which were also boosted by the active trade in the Estonian border region.

In contrast, excise tax revenues on petroleum products (-4.6 million euros) and tobacco products (-3.9 million euros) were expected .

The additional delays granted affect the non-compliance with the revenue plan of excise tax on petroleum products, but this non-compliance is related to the decline in total cigarette consumption resulting from a reduction in smoking and a change in consumption patterns related to the demand for new products (heated tobacco, electronic cigarettes, etc.). with a lower excise tax.

The main products of ordinary activities come from the income of the UIN, which, given the sharp increase in contributions according to the UIN declaration data for 2017, amounted to 61 million. 39 euros, 26.4% more than expected.

Substantial over-execution of the plan is observed in the revenue from customs duties which, during the ten months of this year, was 7.2 million euros, or 19.8% above the plan.

Significantly, much of the revenue is driven by the increasing volume of iron and steel imports from third countries, which is directly related to current economic growth rates and the rapid growth of the oil and gas sector. construction.

Lower than expected revenue from the IRPP, VAT and real estate taxes (GIS). The tax was not paid for 31.7 million euros, or 2.2%, 28.4 million euros or 1.4% and 10.7 million euros. euros, or 5.3% respectively.

Non-compliance with the IIN plan is linked to lower than expected earnings from dividends paid on cumulative profits in previous years, while non-compliance with the VAT plan affects the reduction in the volume of transactions subject to the standard rate, highlight the reduction of VAT revenues in the energy and wood processing sectors in October.

At the same time, it should be pointed out that the rate of VAT revenue growth this year was significantly higher than in the years following the crisis.

The lower-than-expected incomes of NPISHs were determined by the decrease in the cadastral value of the land, which is intended for residential buildings, and which was encumbered with the cadastre information system – a cultural monument, as well as discounts granted by the local authorities.

In general, the implementation of a good income plan

In the ten months of this year, non-tax revenues show good overall performance in the general government budget, while a separate royalty plan is not being met. The non-tax revenue plan is running at 128% this year, with a top-notch business figure of 110 million euros.

The credit overrun of the plan is mainly due to the higher amount of dividends paid by AS Latvenergo (62.2 million euros) on earnings from previous years, as well as the payment of additional premiums (44.2 million euros). euros) for public debt refinancing operations.

It should be noted that this top-down income will be adjusted according to the EKS methodology. AS Latvenergo's dividend income will be offset by appropriate expenses to reduce the volume of the mandatory purchase component for end users of electricity.

On the other hand, the premium premium will not be fully accounted for in government revenue because it is essentially a financing operation.

It should also be noted that the amount of revenue from the auctioning of emission allowances allocated to Latvia amounted to 18 million euros, an increase of 119.7% compared to forecasts.

In return, lower than expected revenues were collected in the form of royalties, such as state royalties for state guarantees and legal and other services (of 6.4 million euros). or 9%), State royalties for the maintenance of safety reserves for petroleum products 2%), financial stability charges (€ 5.6 million or 35.6%) and road tolls (4%). , 9 million euros or 17.6%).

Spending growth is on an equal footing, both in the consolidated state budget (11.8%) and in the local government budget (11.3%), with a rate increase growth in the general budget since June.

Increase subsidized expenditures and subsidies

The largest increase in the consolidated budget was observed in spending on grants and subsidies, which were 283 million euros higher, or 20%, than last year.

It has been influenced by increasing investment in public sector institutions and enterprises for the implementation of European fund projects, as well as by increased funding in the health sector.

Including an increase of € 47.1 million, or 33%, to the detriment of emergency medical care provided in inpatient treatment facilities, mainly remuneration, as well as an increase of 22.2 million euros, or 18.9% of the cost of purchasing the compensated medicines.

Investments in EU funds, especially at the local government level, led to an increase in investments of EUR 148.9 million, or 22.7% more than in the period under review. ten months from the previous year.

In the general budget, a significant increase in expenditure on goods and services (EUR 131.3 million or 13.1%) is particularly pronounced in the growth of the National Armed Forces.

In the defense, health and justice sectors, as well as in the tax and local government services, wages and salaries increased by € 129.6 million, an increase of 7.2% compared to the last ten months.

The increase of € 156.8 million, or 6.6%, of social welfare expenditure in the general budget was determined by the increase in the average salary of insurance contributions and by the indexing of pensions.

Pension expenditure increased by 95.2 million euros, or 5.9%, while other benefits increased by 61.6 million euros, an increase of 8.4% per annum. compared to the ten months last year. It should be noted that the increase in the cost of family allowances is 25 million euros and that of sickness benefits of 12.9 million euros.

The increase in the cost of family allowance was affected by the increase in the payment for two and more children introduced on March 1 this year, as well as by the increase in beneficiary expenditures by increasing the age of children to 20 years old they continue their studies.

The expansion of beneficiaries has helped increase the number of beneficiaries this year to more than 20,000 people.