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Monday 11.12.2017 | Name days: Valdis, Voldemārs, Valdemārs
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Economic Diary of Latvia. The fairest budget of them all

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThis week, the Latvian Saeima approved the state budget of 2016 in the final reading. Prime Minister Laimdota Straujuma said that the 2016 budget is a budget of every Latvian resident. She also said that the government did everything it could to balance interests of different groups of residents and reduce income inequality.

Official priorities of the 2016 budget include internal and external security, better accessibility of healthcare and improved education quality. Unfortunately, measures to improve the two aforementioned priorities do not include increasing wages of doctors and teachers. What it does include, however, is the allocation of more than EUR 700,000 for the increase of wages of people working in the government. On average, wages of members of the government will grow by EUR 600-EUR 700 per month, which is something doctors and teachers can only dream of at this point.

That said, however, it is hard to notice any signs of combating income inequality mentioned by the Prime Minister. Maybe it all comes down to the fact that the Saeima has also approved a myriad of tax initiatives along with the next year’s budget. These include the adoption of the solidarity tax, keeping PIT at 23%, increasing excise tax on alcohol, oil products, electronic cigarettes and tobacco products and the adoption of gambling fees.

Return of residence permits

Aside from the next year’s budget, there was another major development in Latvia. This one, in contrast to the budget, has gone by largely unnoticed. Members of the Saeima Defence, Internal Affairs and Corruption Prevention Committee have approved the government’s proposal to allow the issue of residence permits or ‘investor visas’ to foreigners who invest EUR 50,000 in a Latvian company and EUR 10,000 to the state budget.

Foreigners will be able to retain a residence permit only if companies they invest in carry out actual business activities and pay taxes. According to amendments foreigners that invest EUR 50,000 into a Latvian company will be eligible for residence permits. The number of employees of such companies must not exceed 50. No more than 10 foreigners that invest money into a single company will be allowed to become eligible for residence permits. It will also be possible to receive a residence permit in exchange for investments of EUR 100,000 in the capital of a company that has more than 50 people and the annual turnover of which exceeds EUR 10 million. In all of the aforementioned cases, foreigners will be eligible to receive residence permits for up to five years.

In addition, Ainars Latkovskis, Chairman of the Saeima Defence, Internal Affairs and Corruption Prevention Committee, has announced that Latvian Security Police has begun checking Russian citizens with residence permits more carefully. This is done to make sure people associated with Vladimir Putin’s regime do not enter Latvia.

Gas – a very strange substance…

The topic of gas tariffs has become topical with the beginning of the new heating season. This week, Aigars Kalvitis, Chairman of Latvijas Gaze, announced that the price of gas is lower in this year’s heating season than it was in last year’s. He explained it with the fact that oil prices are currently low. And because the company calculates gas price based on the average oil price in the first nine months of each year, it can be assumed the heating season will not become troublesome for Latvian residents.

LG supplies gas imported from Russia to Latvian consumers. The desire to leave this energy dependence forces Latvian government to look for alternatives to Russian gas. However, leading specialist of Latvian Energy Council Andris Akermanis has recently announced that the thought of procuring gas from USA, Norway, Qatar or other countries should be discussed in detail. At the very least, politicians should look at this matter from the perspective of transport costs.

Recently voiced statements that Latvia would procure gas from Lithuania at a competitive price turned out false, in the end. This is because liquefied natural gas in Klaipeda terminal is at least one-third more expensive than Russian gas. What is explained to residents as cheap Lithuanian gas is the result of litigation between Lithuania and Gazprom. In 2014, Gazprom and Lietuvos dujos had reached an agreement in regards to a 20% discount until the end of 2015. This discount was offered as compensation for the unjust gas supply price for Lithuania in 2013, which had been higher than that of Latvia. The volume of compensation is EUR 81 million.

Politically speaking, this is presented as an accomplishment of Klaipeda terminal. In reality, it is nothing more than a discount on gas, which is something Latvia’s has no access to.

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