On Tuesday, 25 August, Latvian government reached a conceptual agreement in regard to additional revenue in the state budget. As for expenses, the government reached an agreement to reduce budgets of nearly all ministries by 3%, as noted by Prime Minister Laimdota Straujuma.
Straujuma said ministers reached an agreement in regard to additional revenue of the budget for 2017. However, ministers failed to come up with a compromise for Gambling Tax. The government plans to continue discussing this matter.
In order to balance the tax and rate of fees with the current level of inflation and average wages in the country, along with growing turnover from gambling, as well as increase revenue of the state budget, partners of the coalition suggested increasing gambling fees and tax by an average of 4%-5.5% for fees and 4.2%-11% for tax.
Straujuma emphasized it is not possible to support such a rapid increase of Gambling Tax.
The government has agreed to reduce ministries budgets by 3%. This will not apply to Defence, Interior, Education and Healthcare ministries.
At the same time, the PM added that none of the ministries will suffer from budget cuts. «None of the ministries will be impacted, because we expect the state budget to grow next year. This is because revenue of the budget for 2017 is planned to be EUR 189 million larger,» – said Straujuma.
As a result, the government has secured an increase of expenses by approximately EUR 68 million for Defence Ministry in order to increase financing of defence to 1.4% of GDP. It is also planned to increase funding for Interior Ministry. An additional EUR 12 million have been found for Healthcare Ministry. As for additional funding for Education and Healthcare Ministry, the government will discuss this once the new teachers’ pay model has become known.
The PM also reminded that there will be a meeting of the National Council for Trilateral Cooperation on Wednesday, 26 August. On Thursday, 27 August, an extraordinary meeting of the government is planned to resolve matters that were left from Tuesday’s meeting.
Among other things, the government also agreed upon multiple amendments for different taxes.
It has been proposed to raise Light Vehicles Tax to 7.4%.
The solidarity tax is planned to be implemented with 2016. It is also planned to add VAT to residential homes management costs and review VAT reliefs for cultural events.
Another proposal provides for the payment of dividends from state capital companies at 90% in 2016, 75% in 2017 and 70% in 2018.
It is also proposed to raise excise tax for oil products and alcoholic beverages.
The government will also review the proposal to set the minimum mandatory state social insurance tax. The model provides for gradual adoption of minimal mandatory social insurance fee within three years.