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Wednesday 18.10.2017 | Name days: Rolanda, Rolands, Ronalds, Erlends
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Economic Diary. Latvia Week 28 of 2012

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The holiday season does not contribute to the lively economic life of our country. Nevertheless, there were separate flares of business activity this week.

The President prefers energy independence

Even the President of Latvia Andris Berzins is concerned with the issue of energy independence. He invited elected Saeima deputies from Latgale that are part of the ruling coalition, to discuss the possibility of constructing two new HES on Daugava River. The people’s representatives could not give a definite answer, noting that this issue requires an in-depth investigation.

Last month, the head of the state presented an idea to add new sections to the cascade of Hydro Electric Dams on Daugava River. The development of national capacities in the production of electrical energy could become an alternative to the participation in the construction of the Visagina NPP in Lithuania. The reanimation of the Daugavpils HEP project that was cancelled due to protests from the «green» movements in the late 80s was noted as the most possible variant. However, now, the Saeima deputies do not deny the old idea as categorically as they did in the past, saying that this issue should be discussed in detail by specialists.

Latvenergo specialists, on the other hand, are skeptical about this idea. Member of the Board of the energy monopolist Maris Kunickis claims that the reanimation of the Soviet project is impossible. Back then, it was planned to construct a 200 MW hydropower plant, but this would cause the flooding of large territories of land not just in Latvia but in Belarus as well. If the area of the water reservoir is limited to only Latvia, the power output of the station would reduce to 100 MW, which will immediately make it hardly cost worthy. What about the Jekabpils HEP? Power output can only reach 30MW, which will not make an impact on the country’s energy independence.

Who are they – the most honest ones?

While the head of the state is busy with global problems, the State Revenue Service (SRS) begins compiling the so called «white list» – a register of the most honest people in the relationships with the state company. At least two companies have already handed in applications to be admitted to this list, but the state service is not planning on revealing their names yet. If these candidates are deemed worthy to be included on the «white list», information regarding them will be published on the website of the Finance Ministry; if not, it will remain a secret.

The wait for the publishing of the names of the courageous ones will not take long. According to the rules, the SRS is obligated to evaluate a candidate within ten days and then report to the Finance Ministry. With a full compliance with the required criteria, the ministry will allow a company’s inclusion on the «white list»; while with a clear discrepancy will only result in a decline. Insignificant irregularities in specific points will forward the candidate to a special commission (it includes officials and representatives of business organizations). If a situation reaches this institute, ten more days will pass before the commission will give its recommendation – whether the candidate is fit or not.

At first, «white list» members will have only modest bonuses – all from the SRS. The service will allocate special consultants for them (even though only big companies that are already well within the sight of the Office of large taxpayers will be able to join the rotation during the first year) who will warn them about the risks of not paying taxes; swiftly return VAT and respond to inquiries faster. In time, the list of benefits could include additional bonuses: the ministries are ordered to evaluate their own readiness to support honest businessmen. After the end the year, the range of candidates is also expected to increase.

Tax e-Book

The abolishing of traditional tax books: another initiative of the SRS – to replace traditional tax books with electronic versions. Right now, the SRS is preparing a full report for the Cabinet of Ministers on this topic, so the current information on this topic is rather scarce. Nevertheless, it is already known that the main connection channel will be the Electronic Declaration System (EDS). It is expected that individuals will use it on equal terms with businessmen to look up the volume of discounts on PIT and its source (if the person is employed on more than one job). Those, who will remain on the outside of the system, will be able to look up this kind of information using www.latvija.lv.

Foreigners are buying up Jurmala

Finally, one more fact worth mentioning – Jurmala is once again going through a rather massive construction of residential homes. At least, statistics state that Jurmala’s real-estate segment is going up. According to Jurmala City Council, 169 – 193 construction permits were handed out in 2006-2008, these permits mostly accounted for residential houses. In 2009, this market predictably collapsed, and only 79 such permits were handed out that year. The situation gradually improved – there were 106 permits handed out in 2011.

According to market players, there are currently 15-20 multi apartment residential houses that are already issued for exploitation or are expected to be finished in the nearest time. As a result – there are around 300 apartments available in new projects in different stages of readiness. Fifty six buildings are considered to be elite housing by specialists. The rest is business class.

The explosion was caused by the lack of sufficient supply in Jurmala, i.e., no new projects were being constructed in 2008-2010. Furthermore, demand of real-estate was also affected by the opportunity of receiving investor residence permits, so new players decided to develop projects.

Foreign investors became the mechanism for launching the current real estate activity. As the head of the Jurmala department of Latio Edgars Spuravs says, foreigners are buying up around three quarters of housing in new projects. Some experts mention far more radical numbers. So, according to Marketing Manager of Ober Haus Evita Zembega-Zakalovska, foreigners are buying around 95% of housing in new projects. And all this is despite the fact that prices increased by 20-50% in the last two to three years. According to realtors, the price of one m2 varies right now from 2 500 to 5 000 EUR, depending on location: the closer to the sea and the Center of Jurmala – the more expensive it gets.

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