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Monday 18.06.2018 | Name days: Madis, Alberts
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Minister: European Commission cannot stop Latvia’s tax system reform

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvia’s tax reform was planned fiscally responsibly and the European Commission cannot stop the realization of this reform, said Finance Minister Dana Reizniece-Ozola in an interview to Rīta Panorāma programme on Wednesday, 3 May.

«EC cannot topple our tax reform. They can voice their opinions about the contents of the reform, such as inequality reduction and measures to improve competitiveness,» said the minister.

She also notes that Latvia actively and regularly discusses with the EC the planned tax system’s reform. «We will take their opinion into account. But also have to keep in mind that we have our own heads to think with and make responsible decisions,» said the minister.

Reizniece-Ozola notes that the tax reform was planned responsibly to ensure budget longevity. «We based decisions on conclusions made by experts. Our offer is balanced and fiscally responsible. We only expect a slight deficit increase for the transition period. We expect our income to be higher in the next couple of years than without the reform,» the minister comments.

On Wednesday, 3 May, the government intends to view Finance Ministry’s prepared guidelines for the country’s tax policy for 2018-2021.

On 21 April, Finance Ministry submitted for approval guidelines for the tax reform that provide for introducing two PIT rates – 20% for income up to EUR 45,000 a year and 23% for income above EUR 45,000 a year. It is also planned to increase non-taxable differentiated minimum – to EUR 250 a month. The reform also provides for increasing benefits for dependents from EUR 175 to EUR 250 a month.

This tax reform is expected to increase non-taxable minimum for pensioners from EUR 235 to EUR 250 a month in 2018, EUR 270 a month in 2019 and EUR 300 a month in 2020. It is also planned to increase minimum wage from EUR 380 to EUR 430.

As part of the tax reform, it is also planned to cancel solidarity tax and introduce maximum cap for state social insurance mandatory payments. It is also planned to reform the corporate income tax system, and establish that this tax is to be paid at the moment of division of profits with an applied rate of 20%.

Finance Ministry proposes reducing the turnover cap for micro-enterprise tax payers to EUR 40,000 a year instead of the current EUR 100,000, as well as set the tax rate on dividends at 20% and increase maximum wage restrictions. It is planned to improve patent pay regime for small ‘lifestyle’ businessmen.

The ministry also proposes raising gambling tax and set PIT for gambling and lottery winnings that exceed EUR 3,000. It is also planned to raise excise tax rates, considering recent tax rate changes in other Baltic States to secure regional competitiveness.

Prime Minister Maris Kucinskis had previously said that the Cabinet of Ministers also plans to approve tax policy guidelines associated with other matters – minimal wages, excise tax on diesel fuel and budget deficit.

«There has to be clarity on the budget deficit we can afford. The current offer includes EUR 170 million. We have to be absolutely clear on what we can afford. This is why it is planned to discuss numbers in detail. Talks will also be carried out in relation to excise tax for diesel fuel,» Kucinskis said.

The prime minister also added that the discussion about minimal wages will continue after budget deficit becomes known.

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