The Latvian government has reached an agreement with Latvian Association of Local and Regional Governments to retail the current personal income tax proportion on the same level for 2017 – 80% in favour of local government and 20% in favour of the state budget.
For years LPS has been asking to add changes to PIT proportion to provide municipal budgets 81% of PIT. The government, however, has been against this change.
LPS Chairman Andris Jaunsleinis argued that municipalities could agree to accept the current situation as long as the agreement includes a point that details situations when decisions that affect the base of the municipal budget are made fiscal effects are later compensated to municipalities. Prime Minister Maris Kucinskis opposed this request, saying that it could lead to absurd situations, when compensation is performed automatically without any discussions.
Jaunsleinis demanded that in events when the government does not intend to make decisions that could negatively impact the municipal budget no negative influence is added. Kucinskis explained that talks will be held in regards to any proposed changes. In the end, both sides agreed to hold talks about municipal budget changes every year.
In the matter regarding pre-school teachers’ pay, both sides agreed that no compromise is possible at this time. This is because the education reform has only just begun. LPS Chairman noted that it would be logical to reward all teachers equally and gain finances from a single source. Education and Science Minister Karlis Sadurskis agreed that finances should come from a single source. Kucinskis emphasized that it is not possible to find funding for this initiative. «It is a complex matter. We will wait and see how things develop in a year,» – said the prime minister.
The Cabinet of Ministers also emphasized that municipalities will be provided with constant, stable, predictable and functional revenue base at current PIT proportion.
In relation to the matter of equalizing the finances of Latvia’s municipalities, LPS wished to extend the transition period. Kucinskis opposed it, saying that it could last forever, in which case the new Municipal Finances Equalization Law would never actually come into force.
In relation to the Social Pillow programme for teachers, LPS and the government agreed that solutions for teachers who lost their jobs or left their work in relation to the teachers’ pay reform will be found by spring 2017.
In the matter regarding real estate tax policy in relation to homes and apartment complexes, solutions will be sought to ensure balanced tax burden increase alongside the rapid increase of real estate tax base and the need to ensure budget revenue. Solutions have to be simple to administer, while also retaining the rights of municipalities to ensure the most appropriate tax regulation, as stated in the minutes of the meeting.
LPS wishes to find solutions to prevent situations when residents declare residence addresses where those people no longer occupy. Solutions are also necessary to prevent the possibility of not changing a person’s declared address if a person no longer lives there. During the meeting, the two sides agreed that solutions will be sought with the involvement of all responsible institutions.