It cannot be said that this week was rich in grandiose events in the economy, but, nonetheless, it brought several discoveries.
Who is closer?
Tow high ranking guests visited our country at the same time – President of Lithuania Dalia Grybauskaite and Minister for Trade and Investment of the United Kingdom Lord Green. What is so interesting, you ask? Listen well: while the Head of our closest Southern neighbour demonstrated independence from Latvia in decision making, the minister of the Misty Albion, which is much further away from us, underlined the close nature of objectives and intentions.
So, Grybauskaite made it clear that Lithuania intends to build a LNG terminal on its own soil, irrelevant of the decisions of its Baltic neighbours. «Currently, Lithuania pays far too much for gas supplies. We are not discussing anything, we are not asking for money from the European Union, we are simply building,»- the President stated. Meanwhile, she also said that Baltic States need to form a united resource market, but after Grybauskaite’s visit to Latvia, the Lithuanian parliament supported the construction of a small LNG terminal in Klaipeda, it became clear: Lithuania goes on its own way. And its closest neighbours – Latvia and Estonia – will need to decide on their own, will they follow Lithuania or not.
While the Lithuanian President demonstrated a characteristic trait of defending national interests and independence, Lord Green, on the other hand, underlined how the UK needs Latvia and how much in common there is between our countries. For example, according to him, we are both guided by commitment to fiscal discipline: the government of UK plans to come up with a balanced budget in 2016-2017. Also, both countries have been especially concerned by the increase of importance of the export sector in economy. Steven Green noted that almost half of all external supplies of the UK are meant for EU countries. Keeping in mind the slowdown of economic activity within the currency alliance, the minister advised British companies to consider export possibilities to more stable Eastern European countries, including Latvia.
After careful considerations, one would ask the question – who is closer to us?
A gift for manufacturers
In any case, one’s shirt is always the closest, and in terms of business – one’s wallet. The work done by the Cabinet of Ministers in this regard deserves mentioning – the Cabinet approved the new regulations on base cadastral value for 2013. Thanks to these new regulations, real estate tax for some companies can prove to be lower next year than it is this year, because cadastral value will be lower as well. This gift was made possible thanks to an updated –for the first time after «fat years»- zoning of industrial objects: starting from 2013 their numbers will increase from 247 to 1 030. The base land cost for almost a quarter of all zones, and in some cases for buildings as well. Furthermore, the standard volume for large industrial spaces is lowered (i.e. the discount to which is not applied) from 5 to 3 thousand m2. The State Land Service explains these changes with significant events that transpired on the market in recent years: demand for land for subsequent construction significantly dropped, and some buildings are still loaded only partially.
The State Land Service also plans to introduce a new system for calculating cadastral value next year. If this idea is properly realized, recalculation will be carried out two times less often than now (every year), not only taking into account taking into account not only data on transactions of purchase and sale of objects, but the lease as well. To achieve this, officials want to coordinate measures with real estate companies, which constantly operate with such information. Also, calculation methods will be used in such a way that will keep the actual cadastral value 15% below market value.
Our dear Euro
Another, no less significant to business, event took place this week. It became known that the introduction of the united European currency will cost Latvia taxpayers 384 million EUR, 230 million of which are to be allocated by businessmen. This data was brought by Laika stars Consulting Company based on the research it carried out recently.
It was said in Laika stars‘ presentation that expenses, related to Latvia’s introduction of Euro, will consist of several components. So, Latvia’s Eurozone membership will cost taxpayers 28.8 million LVL in the first five years, as part of the European Stabilization mechanism. The total amount will be 144.2 million LVL. Another 8.6 million LVL, according to the Finance Ministry, will be used for replacing the currency by the government in 2013 and 2014 and 1.3 million – by local governments.
Laika stars also claims that significant expenses will burden private business. The survey of 376 managers of different companies shows that the transfer to Euro will cost 71% of firms around 10 to 50 thousand LVL. These funds will be necessary for the introduction of changes to the information systems, documentation and calculation of prices. According to specialists of Laika stars, businessmen of the country will need to expect expenses of 230 million LVL.
Research results show that the attitude of businessmen towards the introduction of Euro is very pessimistic: more than half of respondents noted that currency replacement will not increase their companies’ revenue or trade volumes and will not become a stimulus for export’s development. Private business representatives also believe that Euro’s introduction will not be a strong enough argument for the attraction of investors: because the assessment of the overall business environment, tax policy and the country’s legislation is a first priority to them.
According to Laika stars partner – Vadim Eroshenko – 53% of respondents claimed that they do not support Latvia’s introduction of Euro, while 37% support it, but with the condition that it happens after 2014. “Survey results show that the country lacks a dialogue with business – the main state budget donor. The welfare of the country depends not on which currency is used for paying for products and services, but on a correct economic policy. Our research has shown that the introduction of Euro as it is will not bring any positive effect on economic growth,”- Eroshenko believes.