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Ceturtdiena 18.01.2018 | Name days: Antis, Antons

Minister: priority of budget of 2014 – reduction of income inequality

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvia’s Cabinet of Ministers has developed the budget plan for 2014 with income inequality reduction in mind, says Finance Minister Andris Vilks.

Tax plan of next year’s budget provides for retaining PIT rate on the level of 2013. However, both employers’ and employees’ social insurance rates are planned to be reduced 1%. At the same time, residents’ tax-free allowance is planned to be increased to EUR 75. Benefits for dependants will be increased to EUR 165, Finance Ministry reports.

“The government has managed to secure income inequality reduction and fiscal discipline compliance. The plan of 2014 budget also complies with measures stated in the National Development Plan – allocation of funds for future investments and contribution to a balanced development of Latvia’s national economy.”

Given the fact that Latvia will join Eurozone next year, this is the first state budget of Latvia that is compiled in euro. “Joining Eurozone will be a notable event for all residents, because Latvia is the kind of country that managed to complete all Maastricht criteria in order to secure quality and long-term state development. This is why I would like to thank everyone for their hard work in achieving these results. Thanks to our successful completion of all Maastricht criteria we hold 1st place among EU states. We should, however, keep a cool head and not give in to populism in order to retain stable fiscal policy. Latvia’s joining of Eurozone will secure a more rapid growth of economy and welfare for its residents. This also includes better conditions for business and better macro-economic environment starting next year,” – says Vilks.

State consolidated budget’s deficit is expected at 0.6% of GDP. Consolidated state budget’s revenue of 2014 is planned at EUR 8.58 billion, expenses – EUR 8.75 billion. Therefore, deficit is planned at 0.7% of GDP.

Finance Ministry plans to make sure budget deficit of 2014-2016 does not exceed the cap set by the Convergence programme: 0.9% in 2014, 0.9% in 2015 and 0.8% in 2016.

“Medium-term development of Latvia’s national economy will largely depend on external factors. In spite of positive results of recent months, long-term financial functionality of some countries of Eurozone remains in question. Most countries require further financial consolidation measures,” – Vilks adds.

According to him, Latvia’s next year’s budget contains very important decisions for Latvia’s education, healthcare, culture, transport and social security segments.

“When coming up with solutions to problems of demography, a number of support measures were ultimately developed for the next state budget. Increase of parent benefits and childcare support. It is also planned to to introduce a new parent support and childcare benefit system. Starting from September 1, 2014, it is planned to provide free school lunches to 3rd grade students,” – Vilks says.

According to him, the government also plans to allocate additional funding for the building energy efficiency projects.

In 2014, every Latvian municipality will be guaranteed with loan options for priority goals. This will help them continue their development policies. Loan options will be expanded for municipalities. Finance Ministry plans to allow municipalities to take loans for road infrastructure projects, which is a resource-heavy goal.

“Tax revenue of municipalities will have reached 99% of 2008 in 2014. State revenue is expected to be slightly below that. The government’s offered solution for municipalities will secure notable budget growth and financial resources for development. Budget revenue of municipalities will grow 5 to 20% for 97% of municipalities,” – Vilks says.


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