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Monday 19.03.2018 | Name days: Jāzeps

Rich man Berzins does not believe in poverty of Latvian residents

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Andris Berzins

According to the data from the Welfare Ministry, 425 000 people are part of the increased poverty risk among all Latvian residents: every fifth Latvian resident whose income is less than 150 LVL per month. However, President of Latvia Andris Berzins believes a full assessment of the situation cannot be based on only a few examples. According to him, all is not as bad as it seems.

Latvian residents with low income still pay more money in taxes than people with arguably the same income in other European countries. Latvia’s Gini coefficient (shows the difference in income in society) is the highest one in the European Union. This is due to the fact that Latvian tax system collects more funds from the so called indirect taxes: at the expense of VAT on consumer products, food, clothing and medications. These are the products poor Latvian residents spend their money on the most, Nekā personīga programme (Nothing personal) of TV3 reports.

In order to help those in need, other countries collect taxes from real-estate, deposit interest, dividends and profit; i.e., rich people pay more taxes. And even though for the first time since the restoration of Latvia’s independence the government introduced taxes on dividends, increase of capital and residence, the heaviest tax burden still remains on the shoulders of the poor society, because the amount of the tax-free allowance is reduced from 70 to 35 LVL.

And even though international creditors have insightfully recommended Latvia to introduce a progressive tax and increase the size of family benefits for poor families, the richest families were offered not to be paid the benefit at all; Latvia did not follow the advice. Welfare Ministry has yet to present a support program that would help the people who lost their jobs, but would like to work in some other city or region of Latvia where there is work.

However, President Berzins said in an interview to TV3 that there is not enough information to see the entire picture. In order to see the entire picture, the situation needs to be studied deeper. At the same time, he is convinced that things are not so bad.

He says he would not want to agree with this. That there should be a more accurate method of calculating and assessing residents’ income levels. As an example, Berzins says if the grey economy sector is so big, it is unclear where that income is used.

To the question whether the President sees any relation to the fact that only a small proportion of Latvian families have left the country, the President says: “No, I do not. We are not discussing the migration of the population. We are discussion the division of income. The two things are related, but it is another question.”

The President commented the recent Eurostat survey regarding Latvia’s poverty level. He noted that any related assessments should be done carefully, regardless of the fact that, according to the survey, Latvia has become the third worst country of the EU – according to the results, 40% of Latvia’s residents live on the border of poverty. As a comparison – 21.3% of Germany’s population lives on the border of poverty. Nevertheless, Berzins said Germany reviewed the survey and made its own investigation, according to which this index is only 5%.

To the question on whether or not Latvia is aware of the real poverty level in the country, Berzins replied: “I do not have a real and clear understanding of the situation. I am convinced. But I still do not understand how such a survey is compiled – the results do not reflect the real situation. If we ask London authorities how many people live in the city, they will say they do know; they will also say they know exactly what those people are doing. We, on the other hand, cannot say the same!”

According to the President, the structure of municipalities needs to be reformed to achieve realistic results. Meanwhile, the planning is being based on data taken from “nowhere”, the President believes.


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