«The next year’s budget is the country’s internal and external security budget. Creation of this budget progressed under complicated conditions. The government had to find a solution to compensate negative fiscal space because of an economic decline of nearly EUR 100 million. It was not a simple and quick solution,» – comments Finance Minister Janis Reirs.
«This budget will help secure additional funding for the country’s internal and external security. It should be adequate and coordinated along with agreements with our strategic partners – NATO and member states of the European Union.
Latvia cannot request other countries to guarantee safety for its borders and residents. We need to invest in security ourselves. In the end, Latvia cannot afford to become a weak link in the region. This is why the Cabinet of Ministers has made a decision – to secure 2% of GDP for defence in 2018. Next year’s funding for the country’s defence will be equal to 1.4% of GDP. That of 2017 will reach 1.7%,» – said the minister.
According to Reirs, «the Cabinet of Ministers prepared the country’s budget for 2016 with plans to strengthen the country’s external and internal security, healthcare accessibility and better education quality.»
Also the government has included major measures aimed at reducing income inequality and tax repressiveness to the budget plan. The government has prepared a budget that complies with the economic situation. The budget complies with fiscal discipline requirements and secures funding for priority industries.
Last year, the government had agreed on multiple measures to help combat shadow economy. Step by step the government worked to reduce the proportion of shadow economy in certain industries, said Reirs.
«Nevertheless, I would like to emphasize that state services and ministries have to work more actively in this regard. It has to be done more effectively on a political and operative level in order to secure more effective combating of tax avoidance. Every ministry should actively work in order to provide fair competition and avid increasing administrative burden for businesses,» – said the minister, adding that reduction of shadow economy is the responsibility of the entire country.
«This is why the next year’s budget contains multiple proposals aimed at limiting unfair business practices. For example, we have decided in the government that rules that govern the use of cash registers and cash register systems will be made stricter in order to prevent violations. Information exchange between credit institutions and State Revenue Service will also be improved. This is necessary in order to allow authorities to gain a clear picture about the origin of acquired finances. It comes as no surprise to anyone that money laundering often goes hand in hand with financing of terrorism.
The government’s objective is to contribute to the development of honest business in our country. Honest and successful businessmen can contribute to the development of the country as a whole.
This is proven by the recently published Doing Business rating of the World Bank. According to it, Latvia’s business environment has improved. Latvia has climbed to 22nd position in this year’s rating. We are ahead of countries like France, Spain, Belgium and even Luxembourg.
Baltic States are on very similar positions. Over the course of one year, Latvia’s business environment has improved considerably in multiple fields – business startup, protection of minority investors and securing completion of commitments. Nevertheless, the credit accessibility index has reduced considerably. Compared with Estonia and Lithuania, Latvia has better credit availability and easier tax-paying order. The government still has a lot of work ahead in order to improve the issue of construction permits, access to electricity and registration of properties,» – said Reirs, adding that transparent and predictable tax policy only contributes to business development. The government has provided such a policy, he said. Over the course of the past five years, the main taxes in Latvia have only decreased.
For example, personal income tax has reduced from 26% to 23% and VAT – from 22% to 21%. Even this year’s tax changes will be felt only by certain groups of residents.
Reirs emphasized that the next year’s budget will still hold up Latvia among the most rapidly developing economies in the European Union. «Strict compliance with the country’s fiscal policy helped us stay our course. We will focus on securing long-term economic growth and responsible fiscal policy in the future,» – he said.