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Monday 20.11.2017 | Name days: Anda, Andīna
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Economy Minister: Latvia needs stable tax policy projections

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Daniels Pavluts

The government needs to provide a clear tax policy projection for the future to ensure the stability of the business environment as well as its possible future, which is a significant requirement for attracting new investments to Latvian economy, Minister of Economy Daniels Pavluts believes.

«The significant decrease of the burden of workforce tax is the step which businessmen have been waiting for and what was promised by the government. It is a real reform for improving Latvian economy and competitiveness, which would allow raising salaries and creating new jobs», – the minister notes.

«This is why the requirement for the discussion about the reduction of the Added Value Tax rate is a clarification of the workforce tax reform – when, at what rate and how we can realize it, so that we would fulfill all our previously given promises. We cannot back away from this reform. Also, the workforce tax reform should not be realized just formally – with no real effect for businessmen, but in a convincing way, ensuring real progress for our competitiveness», – Pavluts adds.

Keeping in mind the growing pressure of consumer prices, the issues about reducing consumption tax are being discussed, but they cannot end up being controversial with the promises previously given to the public and our voters – to decrease the workforce tax in 2013, which currently slows the ability of businessmen to increase productivity, competitiveness, develop, invest, create new jobs and raise salaries. This is why we need to make a decision about the VAT rate decrease starting from July this year, the proposal of the Ministry of Finance has to be clear on how the workforce tax reform needs to be realized, Ministry of Economy reports.

Workforce tax burden is formed by two taxes in Latvia – PIT, which is currently 25%, and the state social insurance contribution (SSIC), the rate of which is 36.09%, 24.09% of which is paid by the employer and 11% – by the employee. The effective tax rate is affected by benefits – tax-free allowance (LVL 45 per month), allowance for dependents (LVL 70 per month), etc. Lithuania and Estonia have the highest social insurance payments, but the lowest personal income tax rates, as well as the highest tax-free allowance.

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