On Monday, 30 November, the Saeima approved the state budget of 2016 in the final reading. This budget states revenue could grow to approximately EUR 7.4 billion and expenditure – to EUR 7.69 billion.
61 deputies voted in favour of the budget and 34 voted against. In total, the Saeima meeting lasted for 11 hours. During this whole time deputies were holding debates and voicing proposals.
Compared with 2015, it is planned to increase revenue by EUR 148 million and expenditure by nearly EUR 215 million, as reported by Finance Ministry’s parliamentary secretary Arvils Aseradens.
Multiple proposals from deputies were supported in the budget plan. More than EUR 10 million will be allocated for them. The total worth of budget funds requested by deputies for their proposals reached EUR 263 million.
GDP prediction for 2016 has been set at EUR 26.13 billion. The allowed deficit of the general state budget has been set at 1% of GDP. Maximum state debt for the end of 2016 has been set at EUR 10.1 billion.
It has also been established that the Finance Minister will be allowed to provide guarantees worth EUR 35,956,620 on behalf of the state in 2016.
It is also planned to increase wages of the Prime Minister, ministers, parliamentary secretaries, leaders of Saeima factions and committees and the ombudsman.
It is planned to maintain PIT at 23% next year. Tax benefits for dependants will be increased from the current EUR 165 to EUR 175. However, tax benefits will no longer apply to persons who have reached adulthood and people of working age.
Starting from 2017, it is planned to set up mandatory minimal state social security payments from all working people, including employees of micro-enterprises. Previously it was planned to apply changes to the micro-enterprise tax model. However, deputies have decided to keep the current tax rate of 9% for micro-enterprises whose annual turnover does not exceed EUR 100,000.
It is planned to increase excise tax for petrol and diesel fuel, alcoholic drinks and tobacco products next year. Other tax increases will be applied to light transports and gambling.
It is also planned to adopt solidarity tax in Latvia. It will be applied to employed people and self-employed people whose annual income exceeds the maximum rate of annual state social insurance fees – EUR 48,600. Tax revenue from this is planned to be added to the state budget.
Changes are also planned for VAT application. Starting from 1 July, residential home management services will be applied with 21% VAT. In order to combat VAT defrauding, amendments provide for the introduction of VAT reverse payment model for procurements of mobile phones, tablets, laptops, microprocessors and central processor blocs.
Banks and payment service providers are planned to be made obligated to submit information to State Revenue Service about suspicious transactions of Latvian residents in the field of taxes. It is planned that these changes will come into force 1 April 2016.
Additional funding is planned to be allocated for Latvia’s National Armed Forces, Zemessardze and state cyber defence. Additional funding is also planned for police officers, rescuers and prison administration workers to increase their wages. More money will also be allocated for the State Border guard to strengthen border control.
Additional funding will also be provided to healthcare, including EUR 10 million for the increase of wages of doctors and medical personnel. More money will also be allocated for road management and restoration.
Parliamentarians have also agreed to allocate EUR 300,000 to the World Bank in order to finance research of Latvia’s tax system.