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Saeima approves next year’s budget; more funding for health and defence

Publicity photo.
On Thursday, 23 November, the Saeima approved Latvia’s budget for 2018. Next year’s budget revenue is planned at EUR 8.75 billion, whereas expenditures are planned at EUR 8.95 billion. The largest increase of funding is planned for healthcare. Latvia’s defence budget is set to reach 2% of GDP.

The budget was supported by 59 deputies. 37 members of the parliament voted against.

The Saeima started reviewing laws associated with the budget on Wednesday and continued reviewing them today. Politicians had previously agreed that budget talks would not continue late in the evening.

Forming the budget, politicians were committed to drop the so-called deputy quotas. They also agreed that no additional funding would be allocated for parliamentarians’ proposals. The Saeima stuck to this promise and supported only a couple of proposals on allocation of additional funding. Requests submitted for the budget suggested allocation of additional finances worth EUR 223 million. However, nearly all proposals were declined in the end.

Among deputies’ supported proposals is the allocation of EUR 2.4 million to boarding schools. Deputies also supported the proposal for allocation of EUR 302,250 from the budget for emergencies to higher education to match growth of social fees.

Saeima also decided to support Edgars Putra’s proposal to allocate EUR 12,000 to secure representation of the Supreme Council’s deputies. This amount was secured by reducing funding of compensations for parliamentarians who are not re-elected for a second term.

Revenue of the 2018 budget is planned to be EUR 725 million more than the year before. Budget expenditures are planned to be EUR 624.8 million higher, too.

The largest increase of funding is planned for fields picked as priorities – healthcare, demography, internal and external security, as well as road maintenance.

State base budget revenue for 2018 is planned at EUR 6.16 billion, whereas expenditures are planned at EUR 6.49 billion.

State special social insurance budget’s revenue and expenditures are planned at EUR 2.77 billion and EUR 2.65 billion respectively. The increase of the state special budget is planned to be 9.5% or EUR 230.4 million.

The size of special subsidies for municipalities will be EUR 350.88 million. This includes EUR 256,373,650 for teachers’ pay, EUR 65,637,452 for special pre-school education facilities, EUR 27,893,038 for kindergarten teachers’ pay, and EUR 982,457 for art collective managers’ pay.

The division of Personal Income Tax between state and municipal budget’s is 80% for municipal budgets and 20% for state budget. Planned PIT revenue for municipal budgets will be EUR 1.383 billion. It is also planned to set the total increase of municipal loans to EUR 118,138,258.

Maximum state debt is planned to be around EUR 10.25 billion at the end of 2018. In addition, the Finance Minister will be able to provide guarantees on behalf of the state worth EUR 35,956,620 next year. Also the Finance Ministry will be able to write-off debts before the worth EUR 40,897,907 to liquidated companies or commercial associations. GDP outlook for 2018 is set at EUR 28.359 billion. Next year’s allowed overall government budget deficit to be 1% of GDP.

The Saeima also approved 26 legislative drafts in addition to the state budget plan, as well as two new laws related to the state budget. Nearly 300 proposals were submitted in regards to law amendments. Some arguments surfaced during discussions. Still, work did progress forward more quickly than it did in previous years. Politicians explained it with the fact that this year’s budget package did not contain any major changes to tax rates, because a tax reform was approved in summer to be adopted next year.

Politicians agreed to reduce VAT to 5% for vegetables, fruits and berries typical for Latvia. This reduced tax rate will remain in force from 1 January 2018 until 31 December. At the same time, Saeima deputies also declined proposals regarding possible expansion of reduced VAT rates.

Deputies also approved amendments to the Education Law that provide the government the right to set the minimal number of pupils in middle schools.

Members of the parliament also supported proposal to pay families benefits for youngsters who continue studies at the age of 19. The law also provides bonuses for a specific number of children in a family. The size of bonus pay will be set by the Cabinet of Ministers.

Amendments to the Immigration Law state that the condition for the payment of EUR 5,000 to the state budget in exchange for residence permits will apply to all recipients who have made investments in real estate, commercial associations and reformed bank commitments. This fee will be allowed to be paid in instalments.


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