bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Saturday 23.06.2018 | Name days: Līga
LatviaLatvia

Expert: the government should think some more on planned tax reforms

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU«All reforms cost money – taxpayers’ money. This is why I would like to hear some convincing arguments from policy-makers that income will exceed expenses,» says associated professor of Stockholm School of Economics in Riga Arnis Sauka.

«Talk about Latvia’s relatively high labour burden on labour force has been continuing for quite some time. In this context, the reduction of PIT on labour force from 23% to 20%, even not in all cases as the reform suggests, seems like the right decision to help reduce the proportion of envelope wages. Minimal wages can be increased safely even under high presence of envelope wages. This initiative, I believe, is praiseworthy. It can serve as a good instrument for combating envelope wages,» says Prof. Sauka.

According to the professor, under the high level of envelope wages (approximately 18%, according to SSE Riga grey economy index last year) in Latvia, excessive differentiation should be avoided. «Applying larger taxes on large wages can potentially backfire and punish with larger taxes businesses that pay honest wages,» Sauka notes.

The professor believes policy-makers should rethink their planned tax reforms. «Minimal wages and non-taxable allowance should complement one another, as there is not much point in increasing minimal wages without first raising non-taxable minimum.»

«Considering the current demographic situation, it would not be bad to consider child benefits, especially for large families. In relation to this aspect, we see no large changes in tax reforms. Nevertheless, this matter is also very important in the context of improving the competitiveness of the country business environment. This is mentioned in nearly all studies I have participated in,» the professor added.

Non-declaration of income in Latvia remains very high, according to SSE Riga grey economy index data – even higher than the level of envelope wages, the professor says. «We welcome the idea to assess the introduction of a 0% tax on reinvested profits. Preservation of the micro-enterprise tax regime with added social fees is also the right way, we believe,» Sauka adds.

«Increase of capital tax and the resolution of matters in relation to capital increase are matters that should have been resolved a long time ago. Now it is finally being done, which is a good thing. Raising real estate tax – but only of real estate types are carefully classified based on their type and value. This is also a good step forward. I hope that everything here will be done honestly. But I think you will agree with me that we can expect a powerful lobby in relation to matters on different applicable rates,» the professor explains.

He agrees that VAT change should be approached responsibly: «More likely this should not be done at all,’ he says. ‘Finally, the cancellation of the solidarity tax, I believe, is logical. I think many would agree that we never should have adopted this tax in the first place. Everything that relates to pension benefits, I believe, is open to discussions. I still think application of tax on pensions is something anomalous. It don’t think it is logical,» he notes.

«I would like to mention two specific aspects in relation to the tax system’s reform» the professor concluded.

1.How will the tax reformation project differ from its original concept?

«I hope discussions will not result in the labour tax burden reducing by a mere 1% or less once all is said and done. Slight changes would have no real point, because that way it cannot be allowed to be called a tax reform. Exactly the opposite – such a reform, especially if it results in tax increase, would mean Excel tab approach to tax policy, which is something we had experienced in the past and which had not contributed to the development of the business environment or reduction of grey economy in the country. This is why I hope the final redaction of this project will not differ much from its original idea.»

2.Will the tax reform undergo changes shortly after it is realized?

«Inconsequential planning, especially in the tax policy, according to studies I have been presented with, is one of the biggest problems voiced by businessmen in Latvia. Even more so – I will say that the level of inconsequential planning noted in the past five to ten years is enough for the next two to three generations. This is why I hope policy-makers will assess their work carefully before introducing changes. Cooperation between policy-makers and different international organizations is welcome. It is also good to see that at least some measures in the context of the new tax system will have a transition period. Knowing and understanding game rules is vital for entrepreneurs and investors. Without this aspect, good business environment is unimaginable.»

«It is important to not only introduce the new tax system, but also develop mechanisms to ensure proper functioning. To evaluate what has been achieved, it is first necessary to set goals and the expected result from the tax reform. This is something that is being done now. In addition, it would be best to also predict different indirect results from the reform, such as results that depend on higher economic growth rates and other factors. In conclusion – all reforms cost money, specifically taxpayer money. This is why I would like to hear some convincing arguments from policy-makers that income will exceed expenses,» the professor addressed the government.

Ref: 225.109.109.5876


Leave a reply

SRS uncovers numerous violations more than half of inspected companies

State Revenue Service’s Tax Control Office performed a total of 305 thematic inspections of employers in Latvia in Q1 2018. Authorities recorded violations in 171 inspections, according to information from SRS.

Third level pension plan deposit volumes reach new record value

Residents’ interest for pension savings remains high. The volume of deposits made to private pension funds in the first three months of 2018 has reached a new historic peak: a total of EUR 16.5 million has been paid to 3rd level pension accounts, which is 11.6% more when compared to the same period of 2017, as reported by Finance and Capital Market Commission.

Petrol station network in Latvia caught performing fraudulent activities with diesel fuel

State Revenue Service’s Tax and Customs Police have uncovered and put an end to a fraudulent scheme with diesel fuel performed by some network of petrol stations in Latvia, as confirmed by the service.

Kaimiņš: I believe CPCB is performing a political order

In the evening of Thursday, 21 June, Corruption Prevention and Combating Bureau released three people previously detained as part of a criminal process regarding possible illegal funding of KPV LV party – Saeima deputy Artuss Kaimiņš, his colleague Atis Zakatistovs, and businessman Viesturs Tamužs.

Latvia’s parliament conceptually supports new sanction regulations

On Thursday, 21 June, Saeima supported in the final reading amendments to the Law on International Sanctions and National Sanctions of the Republic of Latvia that are meant to improve sanction regime regulations to ensure efficient application of national and international sanctions, as reported by Saeima press-service.

Storm in Tallinn floods streets, cuts Croatia-Argentina match short on TV

A rain storm has hit northern Estonia on Thursday, flooding some streets in the capital Tallinn, damaged buildings and badly affected the broadcast of an interesting World Cup game.

American banks tested for financial stress show positive results

The U.S. has performed banking stress tests and found that the 35 largest banks operating in the country have enough funds on hand to sail safely through a severe financial crisis.

Saeima fires judge for coming to work in a drunken state

On Thursday, 21 June, Latvia’s parliament supported the proposal to dismiss Rezekne Court judge Arvis Garais from his post. 71 deputies voted in favour, no one abstained and no one voted against.

UK to have three requirements to EU citizens willing to remain in UK

For citizens of the European Union willing to continue living in the UK after the country leaves the bloc, they will have to submit applications and answer three key questions over the internet, according to the country's interior minister.

Weather in Latvia to be rainy and cool during Ligo; next week’s weather to be dry and hot

Weather at the end of the week in Latvia will be dictated by a cyclone. Because of that, there will be instances of rain on Ligo. Weather is expected to improve next week, however, according to Latvia’s State Environment, Geology and Meteorology Centre.

Lithuania’s blood plasma corruption scandal extends to Latvia

The former head of Lithuania‘s National Blood Centre, suspected of corruption and involvement in unlicenced activity, received more bad news this week from Latvia, where investigators of the Lithuanian Special Investigation Service had questioned the Latvian Health minister, Anda Čakša.

Administrative burden to be reduced for foreign students and researchers

The administrative burden will be reduced for foreign students and researchers, as well as all education and research institutions hosting them. This is provided by the amendments to the Immigration Law approved by the Saeima in the third reading on Thursday, 21 June.

Latvian Economy Minister endures no-confidence vote

Saeima declined opposition deputies’ request for dismissal of Economy Minister Arvils Ašeradens.

Swedbank economist becomes new member of Bank of Latvia Council

On Thursday, 21 June, Latvia’s Saeima approved Mārtiņš Kazāks in his new post as member of Bank of Latvia Council, as confirmed by Saeima’s press-service.

Pope Francis’ visit to Latvia will be a national holiday

Latvia’s parliament has approved in the final reading a law that makes 24 September – the day Pope Francis plans to visit Latvia – a national holiday.

ICT specialist numbers in Latvia are below Europe’s average level

In Latvia, information and communication technology specialists form only 2.2% of all employed people in the country, which is considerably below the average level in the European Union – 3.7%. Romania and Greece are the only two EU member states in which the number of ICT specialists is below Latvia’s, according to European Commission’s DESI index.

Hungary adopts prison sentence for helping migrants

Hungarian National Assembly has passed a set of laws criminalising with prison terms some help provided to illegal immigrants by non-governmental organisations.

Harmony plans turning to Constitutional Court to prevent transition to Latvian language in schools

«Why should this reform stay unrealized? It is because schools are not prepared for cardinal changes coming from dozens of other reforms that have already shocked the country’s entire general education system,» says chairman of National Minority School Parents Forum and member of Harmony’s work group in Konstantīns Čekušins.

Deputies detained in KPV LV criminal case not declared suspects yet

Saeima deputy Artuss Kaimiņš and businessman Viesturs Tamužs detained in the criminal process regarding possibly illegal funding of KPV LV party have not yet been declared suspects. Both are currently in police custody. It is likely Kaimiņš will be released later today, 21 June.

Production of mines and grenades planned in Estonia

As the Estonian parliament has adopted new rules on military arms and ammunition production in the country, local defence firm Eesti Arsenal has voiced its plan to build a factory in Estonia to make military explosives.

Total tax debts in Latvia reached EUR 1.224 billion in June

At the beginning of June, total tax debts in Latvia, including topical, halted debts and extended repayment terms were equal to EUR 1.233 billion, which is 0.6% less compared to May, as reported by State Revenue Service.

Switch off internet nationwide during exams – Algerian approach

In an attempt to prevent cheating during secondary school exams, the north African nation Algeria, has turned off internet in its whole territory.

Control Service proposes kicking out shell companies as intensely as offshore companies

Shell companies in Latvia should be combated with the same intensity once shown to offshore companies, says chief of Anti-Money Laundering Service Ilze Znotiņa.

EU imposes tariffs on blue jeans, motorcycles and other U.S. export goods

The European Union will introduce retaliatory tariffs against U.S. exports on Friday, EU Trade Commissioner has stated a top official has stated in the bloc's reaction to Washington imposing steep duties on steel and aluminium earlier in June.

Latvia’s Saeima proposes improving job-combining rules for state officials

On Wednesday, 20 June, Latvian parliament’s Public Administration and Local Government Committee decided to submit for review amendments to the Law on Prevention of Conflict of Interest in Activities of Public Officials.

Newest comments