OREANDA-NEWS. April 22, 2011. Saeima adopted in the last reading amendments to the law on the 2011 state budget envisaging revenue in amount of 4.261 billion lats which is by 107 lats more and expenditure in amount of 4.755 billion which is by 27 million lats more than in the approved budget. With amendments the state budget deficit (according to national cash-flow methodology) will be reduced down to 493.6 million lats or 3.7% of GDP.

The Minister of Finance Andris Vilks says:

“These budget amendments are very important to improve fiscal situation in Latvia and to increase Latvia’s reputation in the world. Having adopted these amendments the Parliament proved that Latvia is predictable and favourable for investments, it is a country which goes consistently along the chosen way ensuring budget stability and economic growth recovery.”

“I am happy that the entire coalition could agree on constructive work on these amendments, and it gives assurance that we will be able to start to work fruitfully immediately also at the draft 2012 budget by taking fiscally sustainable and responsible decisions on financing for the next and following years,” stated the Minister of Finance.

The Parliament also approved nine accompanying laws – amendments to the excise duty law, value added tax law, lottery and gambling tax law, lottery and gambling law, railway law, law on state benefits in the time period from 2009 till 2012, law on maternity and sickness insurance, law on insurance in case of unemployment and law on bailiffs.

In view of increased revenue forecasts, consolidation measures and growing GDP, with the amendments the state budget deficit is planned 3.7% of GDP according to national cash-flow methodology. Taking into account planned corrections according to ESA 95 methodology (0.4% of GDP) and forecasted local government budget deficit (0.14% of GDP), it is expected that total general government budget deficit according to ESA 95 methodology in 2011 will be approximately 4.2% of corrected GDP.

The main changes in the state budget:

total consolidation amount planned in the 2011 state budget is 27.9 million lats:

revenue increase by 21.2 million lats (excise duty, VAT, lottery and gambling tax and other changes);

expenditure cut by 6.7 million lats;

state budget revenue forecasts have been updated following evaluation of tax and non-tax revenue plan execution trends and changes in the economic situation. Tax revenue in the basic budget is forecasted by 29.8 million lats more. However non-tax revenue is planned by 30.3 million lats more (including revenue from dividends – by 18 million lats). The forecast of social insurance contributions in the special budget have been increased by 18.7 million lats;

additional financing in amount of 16.7 million lats in order to pay state aid to biofuel producers for the biofuel produced in 2010;

expenditure has been increased also at expenses of paid services and remaining foreign financial assistance for emergency expenditure and completing of project implementation;

according to forecasts revenue from foreign financial assistance and paid services and other self-earned revenue as well as respective expenditure has been specified;

resources have been –redistributed among ministries, programmes (sub-programmes) and expenditure codes according to economic categories;

social budget expenditure has been decreased by 11.6 million lats basically taking into account forecasted reduction of benefit receivers or benefit amount; the biggest changes are planned in resources for unemployment benefits.

Amendments to accompanying laws:
amendments to the excise duty law envisage increase in the excise duty on cigarettes, strong alcohol and diesel fuel, change conditions for excise duty on natural gas and incentives on diesel fuel for farmers, as well as specify legislative norms regarding supplements and diesel fuel subject to excise duty exemptions and procured by agriculture goods producers, so that the said diesel fuel could be bought by the agriculture goods producers who actually produce agriculture goods;

amendments to the value added tax (VAT) abolish reduced VAT rate of natural gas supplies to inhabitants and apply VAT standard rate 22%;

amendments to the lottery and gambling tax law increase the tax on roulette and cards and die games, as well as video games and mechanical gambling machines. Amendments to the lottery and gambling law set that as of July 1, 2011 gambling machines and equipment, as well as game programmes for gambling machines will not be subject to labelling;

amendments to the law on state benefits in the time period from 2009 till 2012, amendments to the law on maternity and sickness insurance, law on insurance in case of unemployment envisage maintaining of restrictions on benefit payment provisions (maternity benefit, paternity benefit, parental benefit, sickness benefit) and the amount of unemployment benefit till December 31, 2014;

amendments to the railway law exclude the norm stating that compensation paid from the state basic budget to railway passenger carriers to cover the pay for railway infrastructure use for inland transportation, shall not be less than in previous budget year;

amendments to the law on bailiffs envisage that the accounts of sworn bailiffs as state officials should be kept only in the Treasury.