Latviski English По-русски
Wednesday 21.02.2018 | Name days: Eleonora, Ariadne

Social partners not to support 2011 budget draft

(No Ratings Yet)

Vitalijs Gavrilovs un Peteris Krigers

The National Tripartite Cooperation Council’s meeting ended without reaching any compromises – the social partners will not support the government’s prepared 2011 budget draft.

According to the social partners’ opinion, the joint budget expenditure reduction measures have are not carried out, and this will have a negative impact on the medium-term development, reports LETA.

The President of Employers’ Confederation of Latvia (ECL) Vitālijs Gavrilovs acknowledged at the meeting that his proposed suggestions on the budget were not taken into consideration, and only a political decision has been taken on which the parties Unity (Vienotība) and the Greens and Farmers Union (Zaļo un zemnieku savienība) had agreed on.

The draft budget does not focus on the expense reduction, and will leave a negative impact in the long term, believes the ECL.

The Chairman of Free Trade Union Confederation of Latvia (FTUCL) Pēteris Krīgers also points out there is no other choice but to regard the budget as either the unwillingness to carry out the work, or as the lack of political will.

During the meeting, the representatives of government also did not offer any compromises, emphasizing that the currently reached agreement provides all the possible compromises, as presently it is not possible to find alternative budget deficit reduction measures.

The FTUCL put forward to government a number of requirements: to maintain the reduced value added tax (VAT) rate of 10% for medicinal products, electricity and heating, to increase the real estate tax (RET), to apply the untaxed minimum per each member of family, and to retain family benefits during the crisis period. The FTUCL categorically opposes to the increase of the employee’s compulsory social insurance payment rates by 2%, without consulting the social partners.

After examining the state budget draft for the year 2011, the Confederation expresses the view that 2011 state budget consolidation measures affect the inhabitants of Latvia and lower their solvency, especially in the case of families with children; therefore, the FTUCL is against the adoption of such budget.

Even though before the elections the government regarded state expenditure cuts as the main priority and promised to create a progressive tax system, shifting the tax burden from labour to other areas; unfortunately, in reality new expenditure is scheduled for workers – for 2011 budget consolidation it is planned to raise tax revenues by 70% and reduce expenditure by only 30%. This clearly shows that the government has refused to carry out structural reforms and does not reduce the state administration expenses, the FTUCL emphasizes.

The changes will mostly concern the VAT tax raise. Trade unions are up in arms about the VAT rate increase for electricity from the present 10% to 22% – regarding this proposal as increasingly severe and half-baked.

Moreover, the Free Trade Union Confederation disagrees with the VAT rate increase for heating, because as of October 1 the outstanding debts to the local governments for heating comprised more than 15 million lats. This indicates that the inhabitants of Latvia are already unable to pay the existing bills for heating. Consequently, the increase of other reduced VAT rates, such as for natural gas, books, newspapers, or medicines would drastically reduce the population’s prosperity level. Inhabitants’ RET debts to local governments already exceed 30 million lats; therefore, raising this tax for living areas without applying untaxed minimum would amplify the residents’ indebtedness to local governments.

Along with raising VAT rates for medicinal products, the government is not shy to cut off funds for compensatory medicinal products and medical services. Despite the fact that population’s co-payments for health care services are the highest in Europe, due to which the medical care has become inaccessible for the majority of patients, the government intends to continue worsening the situation in healthcare also in 2011, believe the trade unions.

Moreover, despite the World Bank and the World Health Organization’s recommendations to refrain from healthcare budget cuts, and politicians’ promises to improve the accessibility to medicine, the healthcare budget will be cut by 12.5 million lats. Also, after increasing the VAT for medicinal products and electricity, the medical services will also become more expensive and the patients’ co-payments will not reduce. This implies that the government has distanced from its pre-election promises on improving the healthcare’s quality and accessibility, considers the Confederation.

Starting from 2011/2012, the government also plans to reduce state-paid places for students, and cease funding the studies of Social science students.

Moreover, tax changes for workers – the small decrease in the individual income tax (IIT), and increase of the untaxed minimum and minimum wage – would not be able to cover the expenditure created by the above-mentioned VAT rate changes; thus, such tax policy will undoubtedly leave a hole in every families’ budget. Also the increase of compulsory social insurance payment rates by 2% (from 9% to 11%) at the expense of workers has never been on the agenda of the government and social partners. A similar twist is the decision on family allowance removal for each child. Such decisions clearly prove that the biggest burden in 2011 will be shouldered by the already insolvent Latvia’s population.

Few weeks before the formulation of 2011 state budget, the Free Trade Union Confederation signed agreements with the political associations represented in the government on the support of maintaining the reduced VAT rates during the 10th Saeima mandate. However, the signed memoranda were ignored, proving government’s inability to make precise calculations, emphasizes Krigers.

Although an extensive shadow economy combating plan has been drafted, the government expects to obtain only 15 million lats from these measures, while at the same time it is intended to gain 14 million lats from VAT rate raise. The Confederation believes shadow economy prevention should bring more funds in the state budget.

It was also pointed out that these tax changes and other consolidation measures would not promote legal economic growth, and will even more propel the shadow economy growth and emigration.

When drafting the 2011 budget, the government makes another mistake by not performing the medium-term – three years – state budget formulation, which would ensure balanced tax policy and foster more rapid economic and employment growth, states the Confederation.

Leave a reply

  1. Ren says:

    So, they should, probably, insist more on convincing the parties.

    Thumb up 0 Thumb down 0

FCMC invites Bank of Latvia to provide ABLV Bank with yet another emergency loan

The Finance and Capital Market Commission (FCMC) has invited the Bank of Latvia to issue ABLV Bank another emergency loan.

Crime rate in 2017 was the lowest in Latvia’s history

Last year’s crime rate turned out the lowest in Latvia’s history, as reported by Prosecutor General Ēriks Kalnmeiers in his annual report.

LEC: government priorities should include searching for causes and solutions, not the guilty

Latvian Employers’ Confederation (LEC) is worried about ongoing events and their negative effect on the stability and future development of the country’s economy. LEC believes that stabilization of the financial situation requires careful coordination of actions between institutions and the government.

Producer price level in Latvia grew 0.9% in January

Compared to December 2017, level of producer prices in Latvian industry rose by 0.9 % in January 2018. Prices of products sold on the domestic market went up by 1.2 % and prices of exported products by 0.6 %.

Latvian President believes country’s financial system is stable; prime minister plans to report to European Council

«Latvia’s financial system is stable, and there is no reason to worry about possible instability of the banking system. Banks continue working as usual,» says the President of Latvia Raimonds Vējonis.

Corruption Perception Index in Latvia experienced no major changes in 2017

Latvia’s positions did not improve much in Transparency International’s compiled Corruption Perception Index 2017, said Delna – Society for Openness acting director Liene Gātere in an interview to Rīta panorāma programme.

Latvian citizens arrested in Britain under suspicions of organizing slavery

Five people were arrested in a joint international operation by Latvian and British law enforcement operatives, as confirmed by Latvian State Police.

Opinion: Russia is trying to use the situation to create chaos in Latvia

Russia is trying to use the established situation to create chaos in Latvia. Efforts, however, are fated to fail, says chairman of Saeima’s Defence, Internal Affairs and Corruption Prevention Committee Ainars Latkovskis.

Dismissal requested for Latvia’s Finance Minister; parties worried about finance sector sinking deeper

Latvia’s Finance Minister Dana Reizniece-Ozola has failed to prevent the decision made by United States Department of the Treasury, which is ruinous for the country’s financial sector and humiliating for its reputation, says chairman of New Conservative Party Jānis Bordāns.

Defence Ministry: a massive information campaign is being realized against Latvia

Considering events of the last several days in the country’s banking sector and the arrest of the governor of the Bank of Latvia – Ilmārs Rimšēvičs – it is entirely possible that someone is currently realizing a massive information operation. Its structure and execution is not unlike the one observed in USA, France and Germany during the pre-election period, BNN was told by Latvia’s Defence Ministry.

Latvian parliament to search for ways to dismiss current Bank of Latvia governor

Members of Latvia’s Saeima plan to search for a solution in the matter regarding the possible dismissal of the governor of the Bank of Latvia Ilmārs Rimšēvičs.

Bank of Latvia governor: I have received death threats

«This situation is incredibly complicated. This situation is quite possibly the most complicated one I have ever been in. I feel a great deal of support from people I don’t know, as well as my friends and family members. I have decided to not back down – I am innocent. The the people attacking my reputation have only one goal in mind – to have me step down,» said the governor of the Bank of Latvia Ilmārs Rimšēvičs during a press conference on Tuesday, 20 February.

Proportion of people working in Latvia’s culture sector is larger than the average in EU

The number of people working in Latvia’s culture sector is equal to 4.5% of the total number of employed people in the country. This proportion is also larger than the average one across the European Union, according to data published by Eurostat.

Ministry: idea for compulsory secondary education should be put on hold for now

Considering that Latvia’s Education and Science Ministry has several ongoing industry reforms, it would be best to put the proposal for compulsory secondary education on hold, said Education and Science Minister Kārlis Šadurskis during a meeting of Saeima’s Education, Culture and Science Committee.

Association: ECB should become more involved in resolving Latvia’s financial scandal

Association of Latvian Commercial Banks sees a need for the European Central Bank (ECB) to become more involved in the discussion and help resolve the situation, considering evaluation of ABLV Bank’s business model is in direct competence of ECB.

Hesburger to invest 11.5 million euros in Baltics this year

The largest fast food catering restaurant network in Finland and Baltic States – Hesburger – plans to invest approximately EUR 11.5 million in business development this year. EUR 5.5 million are planned to be invested in Latvia’s market, says Hesburger Development Director Ieva Salmela.

Air temperature drops below -30° C in certain parts of Northern Europe

On Tuesday, 20 February, air temperature in central and northern parts of Finland dropped to -27° C… -31° C in morning hours. In Norway, close to the Finnish border, air temperature has dropped as far as -34° C, according to data from meteorological stations.

FCMC suspects someone may want to undermine Latvia’s financial sector

It is not impossible that someone may want to undermine Latvia’s financial sector, said chairman of Latvian Finance and Capital Market Commission Pēters Putniņš in an interview to Rīta Panorāma programme on Tuesday, 20 February.

European exchange indexes decline; Wall Street enjoys a holiday

European exchange indexes declined on Monday, 19 February. No trading was performed at American stock markets, because the country was celebrating President’s Day.

Party: Latvian banking system’s crisis threatens Skanste neighbourhood's development

There are serious risks associated with European Union’s co-financed project for the revitalization of Skanste neighbourhood, including construction of Skanste tramway line, says member of Riga City Council and For Latvia’s Development party Viesturs Zeps.

Public opinion: KGB documents should be made publicly accessible immediately

Latvia’s society believes the KGB documents should be made publicly accessible immediately. In addition, residents say they are confident in their ability to discuss those documents without the country’s supervision, which takes the form of expert opinions prevailing over society’s moral views, as stated by guest researcher of History Institute of the University of Latvia M. His. Marta Starostina.

For Latvia’s Development: the prime minister is gone, but finance minister claims otherwise

«What we have observed in the past several days is that Latvia’s financial sector has received several heavy strikes as a result of the government’s uncoordinated and chaotic actions. Prime Minister Māris Kučinskis has evidently ‘disappeared’ and offers no clear plans to resolve the crisis, whereas Finance Minister Dana Reizniece-Ozola says different things in every interview. Such behaviour will not help resolve the crisis. It could instead pull the country’s financial sector in a much deeper crisis,» says chairman of For Latvia’s Development Juris Pūce.

Bank of Latvia provided ABLV Bank with a loan of 97.5 mln euros in exchange for securities pledge

The Bank of Latvia has provided ABLV Bank with a loan worth EUR 97.5 million in exchange for securities pledge, as confirmed by the financial institution.

Prime Minister: Bank of Latvia governor is not allowed to take official post

As a security measure, the governor of the Bank of Latvia Ilmārs Rimšēvičs has been applied with a prohibition to take post, said Latvian Prime Minister Māris Kučinskis after a meeting of the Cabinet of Ministers.

Poland's halt to logging in ancient forest came after irreparable damage

Although Poland has stated logging in the old-growth Bialowieza forest has been stopped, Warsaw has failed to reveal the amount of trees already cut down.