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Wednesday 25.01.2017 | Name days: Sigurds, Zigurds
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Signature collection begins to lift PIT for state funded pensions

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUOn 30 March, ManaBalss.lv portal launched a petition titled ‘Pension without tax’. The goal of this initiative is to lift PIT from 1st level state funded pensions. In order for this initiative to be submitted to the Saeima for review, it needs to receive 10,000 signatures from residents.

«Our objective is to apply amendments to the legislation and make it so personal income tax is no longer applied to 1st level state funded pensions,» – explains the author of the initiative Arnis Vērzemnieks. «Changes would remain in force from 2020 to 2045 and make sure the generation that succeeded in securing Latvia’s independence in 1990 would not experience a drop in their quality of life once they retire. Upon reaching pension age, residents have the right to receive financial assistance without repeated tax payments,» – adds Vērzemnieks.

State Social Insurance Agency’s latest data suggests that approximately 86% of the current pension recipients receive pensions that are below the current minimal wage amount in the country – EUR 370. Pension amount paid to 32% of pensioners in the country is lower than the tax-free minimum for pensions – EUR 235. According to results of a recent SKDS survey, nearly 40% of residents are forced to financially support residents of pension age. This is because the pension amount paid to those residents is not enough to ensure subsistence.

«Estimates suggest that income of residents who are currently employed may decline in half upon reaching pension age,» – says Vērzemnieks. ‘Residents who had retired within the last decade have not had the opportunity to save up sufficient financial resources for their retirement. Rapid changes experienced by residents in the «90s, following the change in Latvia’s economy, created difficulties for residents to adapt to their new life. Most people had to think about survival and feeding their family than creating savings for retirement.»

As long as Latvia’s development level remains below that of Nordic countries, for example, it should not be allowed to charge taxes from state pension recipients and thereby push people to the brink of poverty. Pensions in European countries are charged with PIT, but those pensions are significantly larger than those in Latvia. In addition, their tax-free minimum is larger as well. For example, the tax-free minimum for pensions in Germany is EUR 1,225. Minimum wages there are EUR 1,200 per month. In Latvia, on the other hand, the minimum wage is EUR 370 and the tax-free minimum is only EUR 235. In Lithuania, Bulgaria, Hungary and Slovakia, whose development level is equal to that in Latvia, 1st level pensions are not charged with PIT.

Ref: 102.109.109.3735


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