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Saturday 22.10.2016 | Name days: Irīda, Īrisa

Economic Diary of Latvia. Sanctions, taxes and keeping promises

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThis week is notable mostly because of a preliminary piece of news that Russia may decide to lift its embargo on imports of fish products in Latvia in the next two weeks.

This piece of information came as a result of a visit by Latvian Agriculture Minister Janis Duklavs and Director General of Latvian Food and Veterinary Service Maris Balodis to Moscow. Latvian officials, met with Russian Agriculture Minister Aleksandr Tkachev in order to discuss ways of resolving the sanction war aimed at Latvian fish processing companies.

After the talks, Janis Duklavs announced the discussion was constructive. The two sides agreed that Latvia will provide Russian supervisory authorities additional information, including translated versions of some of the previously sent documents. According to the minister, Russian colleagues have promised to review the information quickly. If need be, Russian officials will ask additional questions to companies in which violations have been found. Once the Russian side receives the necessary information from Latvia and reviews it, it will be possible to discuss the matter of lifting the temporary ban on imports of Latvian canned fish products, said Duklavs.

Practically on the same day of Duklavs making this announcement, Aleksandr Tkachev said that Russia is prepared to lift the ban on Latvian fish products in two weeks’ time – after a detailed review of received information. «If no violations are noted, restrictions will be lifted,» – said Tkachev.

As previously reported, the ban on imports of Latvian and Estonian fish products was established by Russia on 4 June 2015. The reason for this embargo was Rosselhaznadzor’s uncovered systematic violations in the labeling of fish products and exceeded levels of benzopyrene concentration.

With a delay to the plan

According to the head of Latvian State Revenue Service Inara Petersone, Russian sanctions aimed at products imported from Europe have impacted tax administration in Latvia. This can potentially delay talks in regard to the country’s next year’s budget.

According to SRS’ report for the first half-year of 2015, tax administration is currently below expectations. The state treasury was expected to raise EUR 4.08 billion in the first seven months of 2015. In reality, only EUR 4.05 billion have been collected in the aforementioned period.

VAT administration was previously planned at EIR 1.1 billion. In reality SRS has managed to collect only EUR 1.07 billion. Nevertheless, compared with the first seven months of 2014, VAT administration has grown by 3.8%.

Corporate Income Tax administration is currently at EUR 222.57 million, which is 5.2% more in comparison with the year before, but still EUR 4.95 million below the plan. Social insurance fees for the first seven months of 2015 are behind the plan by EUR 3.66 million (at EUR 1.35 billion). Non-tax administration is EUR 8.18 million behind the plan (at EUR 246.23 million).

PIT is actually ahead of the plan – EUR 822.94 million in comparison with EUR 822.1 million. Excise tax amount is currently at EUR 445.56 million as opposed to the originally planned EUR 433.81 million, as reported by SRS.

Internal and external security, education and medicine – some of the most expensive fields – will be the main priorities of next year’s budget. The first meeting of the coalition work group for the development of the budget for 2015 was held this week. According to Finance Minister Janis Reirs, the budget will be based on expectations that GDP will turn out 3%, deficit will not exceed 1% and consumer prices will grow 2%.

Banks fail to keep their word

In a state of sanction war, declines in collected taxes and the necessity to invest more and more money into defence and security, the matter related to the role of credit institutions in the development of national economy has been put up for discussion.

As reported by Economy Minister Dana Reizniece-Ozola, coalition parties plan to discuss the situation with the allocation of loans. On 7 August, partners of the coalition plan to listen to the report of the Finance and Capital Market Commission and governors of the largest banks about trends in loans of households and the commercial sector.

Previously, the minister had landed criticisms on banks, saying that their policy hinders economic growth. She described their policy as very poor.

Reizniece-Ozola reminded that while the Saeima was discussing the adoption of ‘left keys’ principle in mortgage loan services, banks were actively calling for a refusal of such changes, promising to renew lending services. Now it seems that politicians have kept their word and banks have not.


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