bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Friday 26.05.2017 | Name days: Varis, Eduards, Edvards
LatviaLatvia

Economic Diary of Latvia. Banking secrecy is no more

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU2016 is not far away so it is worth reminding that 1 January 2016 marks the entry into force of the Convention on Mutual Administrative Assistance in Tax Matters prepared by OECD. This document states that Latvia will become part of the automatic information exchange network in Europe.

Up until now information regarding taxes was exchanged only as part of administrative or criminal investigations. Now, on the other hand, financial institutions part of the information exchange system will have to report such information automatically.

In practice this means Latvian credit institutions and insurance companies will start providing tax administrations of other countries information about bank accounts and income of their clients. Local tax services will be provided with analogous information from foreign services. While there is currently no reason for concern, because the first exchange of information will take place in 2017 about information from 2016, it is worth keeping in mind that this law will make secrets apparent.

In particular, the 6th section of this convention provides for systematic and periodical exchange of information about taxpayers even if authorities have no suspicion regarding possible tax crimes.

Information that will be exchanged among tax administrations of different European countries includes data regarding investment revenue, account balance, information about interest or dividend income, income from selling financial assets of private and legal persons, etc.

63 countries have signed this convention and 50 of them have already realized it in practice. This includes Belize and the British Virgin Islands, as well as jurisdictions, companies of which are actively used in international tax planning measures: Singapore, Netherlands, Latvia, Lithuania, Lichtenstein, Switzerland and others. 38 more countries plan to join this convention by 2018.

Experts believe countries for which banking business is the key source of income will try to provide minimal information about their clients. Switzerland, for one, uses a ‘payoff tax’ in exchange for no requests from UK, Italy and other countries. It is possible that this practice will gradually develop with time in other countries as well.

What about businessmen who are currently trying to resolve problems of tax optimization and maintaining confidentiality by allocating assets abroad? One option is for them to return to their country and pay taxes in accordance to local rules and rates. Another option is for them to start using more complicated capital ownership structures. The third possible option is for businessmen to leave for countries that are not part of this new convention. There are people like that. The question lies in their readiness to relocate their assets in far-away countries and follow changes in legislation and economic situations there.

How low can you go?

Meanwhile the International Energy Agency published its latest World Energy Outlook this week. In it, IEA states that no quick oil price recovery is expected. This is because it is far more important for OPEC to increase its market share, even if it hurts value. Nevertheless, a significant decline of investments in the past year is only expected to help return the price of oil to USD 08 by 2020, as expected by IEA.

This outlook is important for Latvia because it allows for a rough estimate how long the country might remain in an area of low inflation.

This week, the Central Statistical Bureau of Latvia published information regarding the growth of consumer prices. Compared with September, prices had growth by only 0.3% in October. Price growth was so insignificant that the annual inflation index remains in the negative (-0.2%). Weak growth is dictated by low oil prices. Inflation will remain close to zero until the ‘black gold’ becomes more expensive.

Attempts to speed up inflation will continue in the world. Inflation has already reached the bottom in many countries. Similar to Latvia, inflation growth is returning very slowly. It is stimulated mainly by wage growth. Low resource prices, weak economic activity and unemployment remain as the factors that hold back inflation growth.

How to marry social responsibility and business?

In such a situation, social entrepreneurship becomes especially topical. It is often used as a tool to solve social problems the government simply cannot handle and businesses would rather avoid.

One of the problems in Latvia lies in the fact that established legal forms of enterprises do not comply with criteria of social entrepreneurship. For example, if it is necessary to involve volunteers in some project, a commercial established is unable to do that; if a social enterprise is founded for the needs of social entrepreneurship, the difficulty lies in the fact that NGOs cannot make profits.

In September, Saeima Social and Labour Affairs Committee created a work-group to develop a law on social entrepreneurship. The first conclusions will become known closer to the end of the month, at the next Social Entrepreneurship Forum.

In parallel to that, ALTUM financial development institution and Welfare Ministry plan to launch a programme to support social entrepreneurship in 2016. It will become a pilot project in Latvia for a new direction of state support. According to information from Welfare Ministry, EUR 14.9 million will be allocated for measures to support social entrepreneurship in 2016-2020. Most of this money (EUR 12.7 million) will come from the European Social Fund.

Ref: 017.109.109.7373


Leave a reply

Sunday expected to be summer-like hot in Latvia

This Sunday is expected to be summer-like hot, whereas the week after will be cold and rainy, as reported by Environment, Geology and Meteorology Centre.

Pensioner guide: old people are isolated from society in Latvia

«In my experience with social care, I was surprised by the dominating belief that the only thing old people need is elementary care – some food, a wash and a walk outside. Psychology of old people is something completely alien to people in Latvia,» says initiator of Pensioners Guide in Latvia Nelli Skadina.

SEB: reimbursements paid to nearly 340 loan clients over the past five years

In five years since the signing of the first loan payment insurance contract, reimbursements have been paid to nearly 240 SEB Bank clients who took loans and experienced unexpected difficulties after.

Number of tourists to Riga up 7% in 2017

In the first three months of 2017, a total of 263.5 thousand people were serviced in Riga’s hotels and tourist accommodations. 221.3 thousand of those tourists were foreign guests. Compared with the same period of last year, the number of tourists has grown 7%.

Estonian capital’s Deputy Mayor arrested over waste management dealings

The Deputy Mayor of Tallinn, Arvo Sarapuu, accused of deliberately violating procedural restrictions an especially large scale as part of a criminal case, has been arrested by the Estonian Internal Security Service.

Saeima ratifies convention on restriction for the use of mercury

On Thursday, 25 May, Latvia’s Saeima ratified Minamata Convention on Mercury. The objective of the convention is protecting people and the environment against anthropogenic emissions and leaks of mercury.

Europe experienced foreign investment records last year

Last year, Europe attracted a record large volume of foreign investments with 5,845 new direct investment projects, which is 15% more than the year before, according to results of EY European Attractiveness Survey.

Electric car charging network expands in Latvia to promote «greener thinking»

The once long-away dream of having cars that run on alternative fuel is now a reality – a special infrastructure network keeps expanding in Latvia to make electric cars more popular, says Motors Latvia BMW Group manager Ivars Norvelis.

Estonian Minister steps down after questioning NATO membership

Estonian Minister of Public Affairs Mihhail Korb has stated he resigns from office after saying he is not in favour of NATO membership.

Construction of a fish freezer commences at Ventspils Freeport

Construction work has commenced in Ventspils industrial territory on Talsu Street 200. Latvian National Fisheries Producers' Organisation plans to build a fish freezer facility there, as reported by Ventspils Freeport.

EC: there is a risk tax reform will increase inequality

There is a risk that Latvian government’s proposed tax reform will increase income inequality in the country instead of lowering it, said head of European Commission’s office in Latvia Inna Steinbuka.

Electronic monitoring of convicts will help have nearly EUR 500,000 for Latvia

Latvian State Probation Service believes electronic monitoring of convicts proved itself. This system has helped save nearly EUR 500,000 for the state budget since 2015.

Grandson of Stalin, who dropped Soviet tyrant’s surname, has died

Russian theatre director Alexander Burdonsky, the grandson of the leader of Soviet Communist mass repressions, Josef Stalin, has died at the age of 75.

SRS and LCCI to cooperate in search for most efficient tax payment models

Latvian Chamber for Commerce and Industry and the State Revenue Service have signed an agreement for the development of better solutions he assist the growth of Latvia’s national economy.

Searching for Manchester attack network, seven people detained

In relation to the May 22 terror attack in Manchester, seven people have been arrested in the UK and Libya, including family members of the alleged suicide bomber.

FM: planned tax reform will create conditions to reduce grey economy

After the publication of specific recommendations for EU member states, the European Commission admits that tax guidelines help resolve last year’s recommendations on reduction of the tax burden for residents with low income.

Economic influence on retail trade depends on migration

Looking at the influence of Latvia’s economy on retail trade industry in Q1 of 2016 and 2017 it becomes clear that future development of this industry depends on migration and inflation growth rates, as concluded in retail trade outlook Maxima Retail Trade Compass.

EC says it has irresistible «carrot» to attract countries to eurozone

EU’s European Commission intends to raise the attractiveness of adopting the euro in eyes of the bloc’s members now having their own national currencies, stated economics and finance commissioner Pierre Moscovici

Antane: government’s indecisiveness and rushed decisions impact transit industry

The refusal of Russian Railways to carry cargoes from Russian ports to Latvia could create a state of emergency for Latvia’s transit industry, says Baltic Association – Transport and Logistics.

Support to Rail Baltica further funding voiced by European Parliament Committee

Political support for continued funding of the railway project Rail Baltica has been acknowledged by a member of the European Parliament Committee on Transport and Tourism.

Kucinskis is not prepared to drop the tax reform

Political parties will have to decide on the extent of realization of proposed tax reforms. Finance Ministry will not work on new proposals, said Latvian Prime Minister Maris Kucinskis in an interview to LNT on Monday, 24 May.

Accessibility to new and effective medicine in Latvia is the poorest in Europe

In terms of accessibility and compensation of new and effective medicine, Latvia is on the last place among EU member states, according to Patients W.A.I.T. Indicator published by European Federation of Pharmaceutical Industries and Associations at the end of April.

Survey: How much time are you prepared to spend on your way to work?

Nearly half of interviewed Baltic residents say they are prepared to spend up to 30 minutes on the road in one direction, according to results of a survey performed by CV Market in Latvia, Lithuania and Estonia.

Latvian ambassador: the ball is on Russia’s side

NATO can reduce the threat of terrorism, but not liquidate it completely, said Latvian ambassador to NATO Indulis Berzins in an interview to Latvijas Radio before the upcoming NATO summit, which is expected to discuss the recent terrorist attack in Manchester, UK.

ECT: Most of Romania population sees domestic violence as normal

Romania has been criticised in a ruling by the European Court of Human Rights for being insufficiently committed to preventing domestic violence.