The decision to divert real estate taxes, which are expected to exceed established prediction, from municipal budgets is movement in the wrong direction that will only cause greater damage for residents, believes chairman of Adazi Regional Council Maris Sprindzuks.
«Municipalities are closer to residents and have a better understanding of the local situation, know residents’ needs and requirements of their respective regions,» the official said about the functions of municipalities.
Investment banker Girts Rungainis says: «Money enters the market, but should ask why would anyone invest in Latvia, which is a single-city country, where Riga reaches out from Saulkrasti to Tukums with a stable 1.2 million population? The real estate market is entered by a generation born in the 80s of the previous century. These people now buy properties and improve their quality of life. These people had no loans at first and they don’t know that it is not necessary to borrow money. It is a force that should be used,» said Rungainis.
It should be said that Sprindzuks believes the real estate tax should be a tax that primarily covers infrastructure maintenance costs in a specific region in accordance with its needs, as taxpayers have the right to receive benefits from their paid taxes.
Even now real estate tax revenue for municipalities that are financed and perform payments to the equalization fund is largely divided for the entire country. For example, real estate tax revenue in Adazi is approximately EUR 1.6 million, which is exactly as much as the municipality’s payments to the equalization system – EUR 1.6 million. In Marupe, Garkalne and other Pieriga municipalities, payments to the equalization fund are much higher than their revenue from real estate tax.
This means the state’s interference in municipalities’ wallets is excessive. This could potentially ruin any motivation from residents to pay real estate tax, because municipalities will not be able to perform their duties before residents or improve and maintain infrastructure. Without paying real estate tax, residents risk losing their homes or leaving their home region or even the country, which is against the interests of the state and municipalities.
According to the investment banker, it is important to consider the history in Latvia when looking at the situation in the country, which, according to him is in a state of instability. «We are walking on a road of resource economy. More money is earned from privatization, not from work. Our people do not have the experience for investing money further, as it is done in Lithuania and Estonia – making money not by speculating but rather by using administrative resources,» Rungainis said.
«I believe it would be best to state in the Law on Real Estate Property Tax the rights for Latvian municipalities to apply real estate tax rates,» said the deputy.
As previously reported, the Cabinet of Ministers does not support the cancellation of real estate tax for the only home. Instead, ministers propose reducing the influence of cadastral value on real estate tax calculation. Finance Ministry believes relieving real estate tax on the only home is not economically justified. The ministry believes problems with real estate tax should be resolved by reviewing cadastral value.