bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Friday 18.08.2017 | Name days: Liene, Helēna, Elena, Ellena, Liena
LatviaLatvia

Latvia warned that budget deficit under tax reform may exceed allowed threshold

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUEuropean Commission’s assessment of the effect from Latvia’s fiscal plan and intended tax reform show major risks of diversion from requirements of the Stability and Growth Pack for 2018.

EU fiscal discipline requirements state that Latvia’s structural deficit in 2018 is not allowed to exceed 1.7% of GDP. The nominal deficit included in Latvia’s stability programme is 1.6% of GDP.

EC emphasizes that without appropriate compensating mechanisms realization of tax reform measures would result in the country’s structural deficit reaching 2.4% of GDP in 2018.

EC economic advisor in Latvia Martins Zemitis notes that EC finds the tax reform mostly justified and includes multiple good things. Nevertheless, measures of the reform are expensive and potentially put at risk Latvia’s fiscal discipline. «The reform is pro-cyclic. It serves as additional stimulus for the economy in the time when lending is actively rejected and EU funds flow into the country’s economy. The economy is already heated. The tax reform will heat it even more. EC is worried whether now is the time for such stimulation,» said Zemitis.

EC mentions in its report that the stability programme includes Latvia’s tax reform, whose main measures include: reduction of PIT rate from 23% to 20%, increase of non-taxable minimum depending on income level, introduce a 0% income tax rate for reinvested profits and equalizing capital tax rate at 20%.

Reform measures will cost the budget approximately 1.8% of GDP. It will be partially compensated income-increasing measures at 0.6% of GDP.

EC notes that the most expensive measure is the reduction of PIT from 23% to 20% (0.9% of GDP), which is a regressive measure. It is also more beneficial for groups of residents with high income. Introduction of a 0% tax rate on reinvested profits will mean a significant income reduction (0.7% of GDP in 2018).

Latvia’s tax reform is beneficial for company owners. This reform will be especially regressive, considering the high level of financial inequality, EC notes. Progressive increase of non-taxable minimum depending on the income level will be a significant positive effect on income division (0.2% of GDP).

EC notes that tax reform’s measures will reduce the relatively high tax proportion of low-wage recipients closer to the average EU level. This is planned to be accomplished by increasing maximum non-taxable minimum and, to a lesser extent, by reducing PIT rate. EC also notes that changes to PIT will benefit households with medium and low income.

Stability programme’s tax reform is planned to help increase total state budget deficit from 0.8% of GDP in 2017 to 1.6% of GDP 2018, which will be followed by an improvement – with deficit declining to 0.5% of GDP in 2020.

Ref: 224.109.109.2096


Leave a reply

Latvia’s export growth was moderately rapid in the first six months of 2017

Compared with the same period of 2016, Latvia experienced a moderately rapid export growth in the first six months of 2017, according to data published by Eurostat on Thursday, 17 August.

Latvia’s annual inflation in July was one of the highest in Europe

Inflation indexes in Latvia and the UK both reached 2.6% in July, which is one of the highest indexes in the European Union, according to data published by Eurostat on Thursday, 17 August.

Kirsis withdraws his candidacy in favour of Aseradens

Riga City Council member Vilnis Kirsis has decided to withdraw his candidacy from the race to become chairman of Unity in favour of a different candidate – Economy Minister Arvils Aseradens.

Rinkevics expresses Latvia’s interest in maintaining political consultations with Palestine

On Thursday, 17 August, Latvia’s Foreign Affairs Minister Edgars Rinkevics met with the leader of Palestine’s diplomatic mission in Latvia, ambassador Taissir Al Adjouri, to discuss mutual relations between Latvia and Palestine and the peace process in the Middle East.

Putin grins to the world’s seven billionth baby, Lithuania wary of border incidents

Russian President Vladimir Putin paid a visit this Wednesday to Kaliningrad, the westernmost point of Russia, but the reports about his trip in the Russian enclave and over the border in Lithuania were strikingly different.

Survey: red considered the safest colour for a car

Most Latvian drivers consider red to be the safest colour for a car. The most popular, however, is black, according to results of a survey by Virši-A fuel trader.

airBaltic’s number of carried passengers reaches a record in second consecutive month

Latvian airBaltic airline carried 393,312 passengers in July 2017, which is 21% more than the same period last year. The number of passengers carried by airBaltic remains the highest it has ever been in the airline’s history, BNN was informed by the company.

Brivais vilnis: nearly all fish processing companies are experiencing losses

Currently nearly all fish processing companies in Latvia are experiencing major or minor losses, says Brivais vilnis chairman Arnols Babris.

American helicopters to perform low-altitude flights within Latvia’s airspace

U.S. Air Force Brigade’s Task Force Phoenix helicopters, which are stationed in Latvia as part of Atlantic Resolve operation, will be performing low-altitude flights from 16:00 to 18:00 from Lielvarde to Dobele on Friday, 18 August.

Healthcare Ministry’s state secretary Karlis Ketners may be replaced

Latvian Healthcare Ministry may replace its state secretary Karlis Ketners. It is possible he will be transferred to work at Finance Ministry, as reported by LTV.

Suspects in Europe's insecticide egg scandal before Dutch court

In the Netherlands, two men have been in court in relation to the scandal of eggs containing banned insecticide that has caused an EU-wide health scare and cost millions of euros of damages.

Indian national with fake documents apprehended on Latvian border

An Indian citizen travelling from Moscow on a bus was caught at Terehovo border control point in Latvia for presenting officers a fake EU family member’s resident card. No criminal process was launched. The person returned to the country he was travelling from.

Latvijas dzelzceļš will not have to pay dividends from last year’s profits

The government decided on Wednesday, 16 August, that Latvijas dzelzceļš will not have to pay dividends from last year’s profits, which were EUR 880,998.

Latvian citizenship provided to 103 people

The Cabinet of Ministers has issued an order to provide Latvian citizenship to 103 people through naturalization.

Estonian Inbank's profits reach EUR 5.7 million in six months

Estonian financial services' provided Inbank made a profit of 5.7 million euros in the first half of 2017, which is a 429.4% increase compared to the respective period in 2016.

Agriculture Ministry invites residents to sign up for measures to support fisheries

From 21 August onward, Rural Support Service plans to start accepting applications for projects to receive support from European Maritime and Fisheries Fund’s action plan for development of fisheries in 2014-2020 as part of projects Innovation, Productive Investments in Aquaculture and Fishing and Aquaculture project processing.

Estonia seeks to improve reputation of state as employer

As the Estonian Ministry of Finance wishes to boost the reputation and brand of the Baltic country's public sector, it has announced a procurement tender aimed at preparing an action plan for reaching these goals.

Warning: there may be short-term problems with Swedbank internet banking functionality

Because of Swedbank’s planned IT modernization work scheduled for the night to Thursday, 17 August, there may be short term problems with payment card and internet banking functionality, the bank warns.

Aseradens: neither Usakovs nor Lembergs should be allowed to become prime minister

If he became chairman of Unity, Economy Minister Arvils Aseradens would mobilize democratic forces to prevent the possibility of either Aivars Lembergs or Nils Usakovs becoming prime ministers, Aseradens said in an interview to 900 seconds programme of LNT.

Caksa believes increasing wages for doctors would improve politicians’ credibility

The planned wage increase in healthcare could be the first step towards improving politicians’ credibility, says Healthcare Minister Anda Caksa.

Bill Gates donates USD 4.6 billion, reduces shares in Microsoft

The co-founder of the U.S. computer software firm Microsoft, Bill Gates, has allocated to charity 4.6 billion U.S. dollars (3.9 billion euros), which is the philanthropist's highest donation since the year 2000.

LOSP proposes using electronic packing slip system to reduce fraud

An electronic packing slip system for goods would be invaluable for agricultural goods, because it would help push out and reduce VAT fraud, says Latvian Agricultural Organisation Cooperation Council.

Latvia and Russia agree on exchange of additional 3,000 universal permits for cargoes

Latvia and Russia will exchange 7,000 universal permits for international cargo transports in 2017. This will be the largest universal permit volume in the past 15 years, as reported by Road Directorate.

Sierra Leone hit by tragic mudslide

A tragic mudslide has taken place in Sierra Leone, where flooding in the capital Freetown caused a mudslide, in which nearly 400 people have been have died.

Talks with potential KVV Liepājas metalurgs buyers to conclude in August

Talks with potential buyers of the insolvent KVV Liepājas metalurgs will conclude at the end of August, says representative of the company’s insolvency administrator Dzintars Hmielevskis.