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Sunday 19.11.2017 | Name days: Liza, Līze, Elizabete, Betija

Economic Diary of Latvia. Micro-enterprises are bothered again

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe tax regime for micro-enterprises has once again ended up in the centre of attention this week. According to specialists of Latvian ministries, the idea of 9% rate has not lived up to its expectations. Nearly 40,000 enterprises that are currently registered as micro-tax payers do not pay a sufficient amount of money to the social budget and do not provide their employees all social benefits.

Such a conclusion coming from specialists of ministries seems at the very least strange, especially considering that persons who have chosen this tax regime comply with Latvia’s legislation and are well-informed that they receive fewer social benefits.

On the other hand, many private persons had previously received the status of micro-tax payers in order to perform at least minimal social payments.

Chairman of Latvia’s Chamber for Commerce and Industry Janis Endzins is categorically against arguments provided by ministries.

«First of all, employees of micro-enterprises form only 7% of the total number (80,000). Nearly half of these people in parallel work in companies that pay taxes. Secondly, if the number of micro-enterprises continues to grow at current rates, in 5 to 6 years’ time they will pay far more to the social budget than regular enterprises.»

In 2011, micro-enterprises paid an average of EUR 30 per employee to the social budget every month. This amount increased to EUR 40 in 2013. Regular companies pay an average of EUR 60. However, there are no positive developments noted in this area, notes Endzins. This is why the preservation of the current trend would allow micro-enterprises pay even more than regular companies.

Harmony and To Latvia from the Heart both support this initiative. Among deputies of the National Alliance, head of Saeima Economic, Agricultural, Environmental and Regional Policy Committee Romans Naudins has expressed personal support for this initiative. The new Latvian Economy Minister Dana Reizniece-Ozola also opposes the increase of the tax.

Janis Endzins has said that it is planned to submit an initiative to the parliament to request the preservation of the micro-enterprise tax at 9%.

It should be added that Kristians Bekeris has launched a signature-collection campaign on to preserve the 9% tax. 3,000 people have already voted in favour of this.

Putting pressure on tax avoiders

Continuing the topic of tax initiatives it is worth mentioning Finance Ministry’s plans to put pressure on tax avoiders. This week the ministry announced that meetings have been carried out with representatives of Latvian Employers’ Confederation and Latvian Chamber for Commerce and Industry. The topic of these meetings was ending the practice of tax avoidance by closing the company that owes taxes. With that, it is planned to introduce personal responsibility for Board members for delayed tax payments.

According to information from the State Revenue Service, by the beginning of October there were 23,000 capital organizations in which authorities did not find any properties whatsoever and whose total tax debt was EUR 800 million or 58% of the entire amount of unpaid taxes.

Finance Ministry’s initiative would serve as an effective instrument to put an end to such practices. Responsibility would pass down to a private person – member of the board. The introduction of such a measure would allow SRS to demand the paying of tax debts from members of the Board.

It should be added that the current regulations provide for allowing the entrepreneur to resolve matters of tax debts. If there are any current of old debts, entrepreneurs can request an extension of the payment term from 1.5 to 5 years, depending on a specific situation.

Current legislative initiative applies to only people who had made debts worth more than EUR 16 thousand and do nothing to pay the money back.

Destination acquired

Rail Baltica railway will be connected to Latvia’s capital with a special branch-off, as confirmed by Latvian Transport Ministry. This is the first specific announcement in regard to the route of the new railway line.

The majority of municipalities through which it is planned to build Rail Baltica do not oppose the project. They are satisfied with nearly all possible route of the new railway line. Two municipalities are against it – Marupe and Babite. Marupe is not satisfied with any of the routes, as each will ‘cut’ the territory into two. Babite municipality is worried that cargo trains may cut through populated areas, a park and ancient cemetery.

There were previously eight possible directions for the new railway line. Now there are only two. Both provide for a branch-off to Riga. Specialists propose building a separate line to Riga Central Station using the existing Riga-Ergli route. Riga will also be connected with Riga International Airport. All construction work in planned to be completed by 2024.

By 2030, Rail Baltica is planned to be connected with Riga Freeport.


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