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Saturday 27.05.2017 | Name days: Loreta, Dzidra, Gunita, Dzidris
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Economic Diary of Latvia. Blooming business

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUIn the latest Doing Business rating compiled by the World Bank, Latvia has climbed from 22nd to 14th spot. In creased accessibility of credit information and executed reforms to ease the tax-paying process have both assisted Latvia’s climb. With that, the World Bank notes that this year’s rating cannot be compared with the previous year. This is because the methodology has changed since then.

Commenting of Latvia’s climb in the rating, President Raimonds Vejonis said there is much more Latvia can still do to further improve its results. According to Doing Business 2017, Latvia has sufficiently improved its legislation: the Credit Information Bureau was founded and the online tax-paying process was made easier.

Similar to last year, Doing Business 2017 named New Zealand, Singapore and Denmark as countries that are the most welcoming for business.

Cross-border trade

Comfortable conditions for doing business and geographical proximity have long since become the base for a very unpleasant phenomenon – alcotourism. After raising excise tax for fuel, tobacco products and alcohol in 2016, Estonians have begun buying those products more actively in Latvia. According to Estonia’s Finance Ministry, 4.2% of the total volume of alcohol consumed in Estonia is bought in Latvia. Border-crossing statistics indirectly confirms the version regarding an increase in cross-border trade: in July 2016 the number of trips to Latvia had doubled in comparison with July 2015. Some Estonians procure alcohol in Latvia to later sell in Estonia. A significant decline in sales of alcohol in trade locations in Estonia’s border regions has also been noticed. This especially applies to strong drinks.

This situation has become a source of headache for Estonia’s state administration. It became known this week that the country’s Tax and Customs Service intends to set up surveillance cameras on all border checkpoints connecting Estonia with Latvia. This will be done to monitor car registration numbers and identify citizens who procure alcohol in Latvia with the intention of selling it in Estonia.

At the same time, the service also has plans to introduce legislative changes to help identify re-sellers of Latvian alcohol. It is noted that the current legislation allows citizens to carry up to 10 litres of strong alcohol and up to 110 litres of light alcohol from Latvia to Estonia.

The tax service intends to prepare to combat the possible emerging of illegal alcohol trade networks in the country.

But business is business, and Estonia’s largest network of stores specializing in alcoholic drinks SuperAlko opened a large store in Latvia’s Valka. The assortment of goods on offer there will soon exceed 3,000.

About the satisfied and the dissatisfied

As for tax innovations in Latvia, it became known this week that the Solidarity Tax, which has become a source of arguments between people who earn more than EUR 4,000 a month and legislators, brought the state treasury EUR 14 million, which is EUR 1.2 million more than what was initially planned, as reported by Finance Ministry.

The total number of people whose mandatory social security payments had reached the maximum amount in 2016 (EUR 48.6 thousand) was 1,374.

It is planned to acquire EUR 23.5 million from Solidarity Tax this year. Finance Minister Dana Reizniece-Ozola believes this tax is well-collected. Nevertheless, discussions about its future are necessary.

The government has offered to preserve the tax for 2017. Unless the Saeima decides otherwise, it will not be cancelled. According to Reizniece-Ozola, the progressive taxation principle is popular among politicians. The Solidarity Tax serves as a form of guarantee for the introduction of such a principle in the future.

A meeting was held between representatives of Latvia’s Chamber for Commerce and Industry and Prime Minister Maris Kucinskis. The two sides discussed this tax. However, no agreement was reached in the end.

The Solidarity Tax came into power in January 2016. It is applied to salaries that exceed the cap for mandatory state insurance fees.

Banks and their profits

About the banking sector. Its profits for the first nine months of 2016 reached roughly EUR 372 million– 18.9% more in comparison with the analogous period of 2015, according to data from the Finance and Capital Market Commission.

In September, banks in Latvia worked with profits worth EUR 32 million.

At the end of September, general assets of the banking sector accounted for EUR 29 billion, which is 7.5% less in comparison with 2015 and 0.9% less in comparison with August 2016.

The volume of deposits in banks reached approximately EUR 22 billion, which is 8.2% less in comparison with 2015 and 1.1% less in comparison with August 2016.

Overall profits for Latvian banks accounted for EUR 314 million in the first nine months of 2016.

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