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Latvian Saeima adopts state budget for 2015

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThis Wednesday, December 17th, the Saeima approved the next year’s budget in the last reading. The revenue of next year’s state consolidated budget is planned at EUR 7.3 billion and expenses – at EUR 7.5 billion.

Debates regarding the budget and related drafts lasted nearly nine hours. 60 deputies of the coalition voted in favour of the new budget. 13 deputies from the opposition – To Latvia from the Heart and Latvian Regional Alliance – voted against the budget. 21 deputies from Harmony abstained from the vote.

Prior to the vote, Prime Minister Laimdota Straujuma thanked the ruling coalition and the opposition for their hard work. She added that work on the state budget was especially tense this year, considering that this was election year and 2015 will be the year of Latvia’s presidency over the EU.

Finance Minister Janis Reirs noted after the budget’s adoption that he is happy, because the new budget is socially-responsible.

This Saeima meeting did not go without criticisms from the opposition. Discussing different proposals, representatives of the opposition said they do not share the coalition’s sense of accomplished work and that they believe this budget is more of a step back than it is a step forward.

Debates were held in regard to specific proposals, but there were no big discussions in regard to the next year’s budget in general.

The state consolidated budget includes the state base budget and state special budget, excluding the overlapping of money transfers between the two budgets.

The state base budget’s revenue is planned at EUR 5.1 billion in 2015. Expenses of the base budget are planned at EUR 5.5 billion. Compared to the 2014 plan, there will be a 4% increase in base budget’s expenses.

The general state budget deficit in expected to be 1% of GDP.

Politicians of the ruling coalition, the Prime Minister and Finance Minister call the next year’s budget ‘the national and social security budget’. Politicians of the opposition, on the other hand, criticized the budget’s review process in the parliament, including the short period of time that was provided for the budget’s review.

Deputies reviewed a total of 200 proposals for the state budget, supporting proposals worth a total of EUR 2 million. Among the supported proposals is the allocation of additional funds for different education institutions, culture, sports and other goals. One of the largest initiatives provides for the allocation of EUR 700,000 for the construction of an Olympic centre in Rezekne.

Priorities of the next year’s budget include the strengthening of Latvia’s defences, social and national security and realization of measures aimed to reduce social inequality and improve the country’s business environment and competitiveness.

It is planned to maintain the current tax policy and not raise taxes. Revenue is planned to be collected mainly from measures aimed to combat shadow economy and better tax administration.

In order to reduce residents’ income inequality, it is planned to increase minimum wages from EUR 320 to EUR 360. This will require EUR 7.9 million from the next year’s budget.

In accordance with the previously made decision, PIT rate will be reduced from 24% to 23% next year.

It is also planned that dependants under the age of 19 who study full time in vocational, higher or special education institutions and receive taxed income during summer months would be applied with dependant benefits.

Changes are planned for social support: it is expected that restrictions on specific sick leave and unemployment benefits will be lifted next year. This also applies to maternity, paternity and parent support.

It is also planned to differentiate the family state budget depending on the number of children in a family. Parents will be paid EUR 11.38 for the first child, EUR 22.76 for the second and EUR 34.14 for any the come after.

It is also planned to allocate funding for victims of violence. Persons who commit violence against others will be provided with rehabilitation.

The government plans to allocate EUR 3 million for the introduction of a new model for the calculation of teachers’ pay. Additional funding for education, including free lunches for 4th graders and the sorting of teachers’ wages, is planned to be allocated from the next year’s planned raising of excise taxes on alcoholic drinks.

In order to improve the situation with social security of micro tax payers, it is planned to change the division of specific taxes in different tax budgets, diverting the majority of funds to social payments. In accordance with the previously approved decision, the micro-enterprise tax rate has been set to 11% for 2015, 13% for 2016 and 15% for 2017.

In order to increase tax revenue, there are multiple measures planned to combat shadow economy – improvement of information exchange among financial institutions, strengthening of the capacity of tax administration, setting of personal responsibility for members of management boards for delayed tax payments, ban on all cash transactions for tax debtors, introduction of informative declarations for leasing and loan service providers.

Additional funding is also planned for defence, including the securing of rapid response forces and presence of allied forces in the country, development of the National Guard and formation of Special Forces sub-units, development of Special Forces and other measures aimed to improve national security.

Finance Ministry plans the general state budget deficit will not exceed the allowed range in 2015-2017 (1% of GDP in 2015, 0.9% in 2016 and 0.7% in 2017). In accordance with medium-term macroeconomic development and fiscal policy for 2015-2017, next year’s economic growth is planned at 2.8%. In 2016 and 2017 the economy is planned to grow 3.3% and 3.6% respectively.


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