Budget, Financial Services, Latvia, Taxation

In the first six months of this year, general government revenue totaled EUR 5.52 billion and expenditure EUR 5.66 billion. 

According to the Finance Ministry, revenue fell behind the target in all major tax groups, except personal income tax revenue, which was EUR 35.3 million or 4.4 percent above the target thanks to strong wage growth in the first two months of the year when Latvia was not yet stricken by the Covid-19 crisis. 

Meanwhile, value added tax (VAT) revenue was EUR 196.4 short of the target, social security contributions were EUR 102.9 million behind the target and excise revenue was EUR 84.1 million short of the target. The shortfall of corporate income tax revenue was EUR 42.7 million and property tax revenue was EUR 22.9 million below the target. 

Representatives of the Finance Ministry indicated that this year tax revenue has been significantly affected not only by reduced business activity but also tax holidays approved by the government as one of support measures for pandemic-affected businesses. According to the State Revenue Service's data, the total amount of tax debts in Latvia expanded from EUR 865 million at the beginning of January to EUR 1.014 billion at the end of June. 

The Finance Ministry noted that general government revenue fell in the first half of the year not only in sectors that have been suffering most from the Covid-19 crisis like accommodation and catering services, transport and warehousing, but also in construction and other sectors. Meanwhile, tax revenue grew year-on-year in ICT, as well as the health and social care sector.