bnn.lv Latviski   bnn-news.com English   bnn-news.ru По-русски
Saturday 19.08.2017 | Name days: Melānija, Imanta
LatviaLatvia

Swedbank: lower labour taxes should be compensated by increasing other taxes

FaceBook
Twitter
Draugiem
print
(No Ratings Yet)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvia’s economic growth remains rather good. It is expected to remain strong in the next couple of years as well. The current weakness of exports is temporary; it is not expected to have significant impact on the job market and private consumption, as mentioned in Swedbank’s latest economic outlook.

Economists note that the political cycle is not reform favourable, undermining the medium-term growth potential and raising risks of labour market and price pressures building up towards the end of the forecast period. Swedbank economists advise politicians and entrepreneurs to act and continue investing on development.

Latvia’s tax revenue forms nearly 28% of GDP, which is one of the lowest levels in the European Union (EU) – average 39%. The central government’s and municipalities expenses are estimated at 38% of GDP, where those in the EU are 49%. The goal of the Finance Ministry’s recently approved tax policy is to have tax revenue reach 33% of GDP in 2016. The proposals for next year’s budget provide for a reduction of labour tax without compensating the reduction with increasing rates of other taxes. This means that the total tax burden will not increase on GDP. It is possible that it will reduce, as reported by Swedbank’s economists.

According to Swedbank’s economist Mārtiņš Kazāks, labour tax should be reduced. But this step needs to be balanced with an increase of some other tax. Otherwise there will be no way to increase funding for healthcare, social security, defence (which is still under NATO’s advice of 2% of GDP). Swedbank economist believes the best option is to increase the real estate tax – it would impact shadow economy and has the least serious impact on economic growth. This would bring the budget considerably more money to combat social inequality and more rapidly reduce the general labour tax.

Meanwhile developing countries remain the global economy’s main engine. However, their growth rates have become slower and their risks – larger. Economic growth of developed countries is gradually becoming stronger. It seems the worst is over. Nevertheless, the economic situation and political action differ from country to country. This creates uncertainty for exporters. Eurozone’s recession seems to be over; the situation is slowly improving. Economic growth, however, will remain weak for the time being, because demand is low, unemployment high and problems remain within the banking sector.

Latvia’s GDP growth outlook remains the same – 4.3%. The main engine will be households’ consumption – it will grow more rapidly than investments and exports this year. Exports and investments growth will become stronger next year. This also applies to GDP (4.7%).

According to Swedbank’s economists, Latvia’s exporters are swimming in the stormy waters of the global economy. On top of that, their sailing speed has dropped. Aside from other obstacles that are guaranteed to impact exports growth in 2014, the main reason for the reduction is low foreign demand. This includes the problems of Liepājas metalurgs, reduced flow of cargo export to Afghanistan, smaller exports of grains due to lower yields and lower prices. Nevertheless, exports of other industries continue to grow and Latvia’s export companies continue to gain ground in other markets.

Swedbank’s senior economist Lija Strašuna says it is hard for Latvia’s entrepreneurs to gain market shares because competition is becoming more and more fierce. The same applies to the job market: unemployment reduces and the pressure on salaries and prices gradually grows. In order for Latvian exporters to continue to increase their exports and market shares, they need investments in order to improve productivity and increase capacity.

It is expected that the global economic situation will improve and companies will become more optimistic about their growth potential. Investment activity will increase in the second half of 2013. The financial situation in companies is rather good – obligations have reduced, the ratio between loans and deposits has dropped below the level of 2005. Export growth in 2014-2015 is said to be more rapid. The currently stagnating export of services is growing in strength. Tourism and other related industries’ increase could be more rapid as Riga becomes the European cultural capital in 2014 and Latvia taking on the presidency over the EU in 2015.

Ref: 102.109.109.8761


Leave a reply

  1. J. says:

    The charlatan economists at Swedish banks blew up our economy once. Why do we still listen to them?

    Thumb up 0 Thumb down 0

Kirsis asks police to assess possible forging of votes at Riga City Council

Riga City Council’s Unity faction chairman Vilnis Kirsis has asked State Police to check if the city council’s electronic voting system was used without another deputy’s knowledge or consent, said the politician.

Expert: attack in Spain shows how terrorists switched to more easily reachable targets

Terrorist attacks that transpired in Spain this week shows how terrorists have switched to more easily reachable targets, where security requirements are not as strict, says Latvian National Defence Academy’s Security and Strategic Research Centre researcher Martins Hirss.

New mandatory tests in schools to be introduced four years from now

In four years’ time – 2021/2022 school year – it is planned to introduce completely new mandatory tests in schools, as reported by State Education Content Centre Director Guntars Catlaks.

Nearly 9,000 children and their parents got homes thanks to state support programme

In the first half-year of 2017, state support helped 1,527 families in Latvia to buy homes. Compared with last year, families’ demand for state support has grown 6%, as reported by Altum finance institute.

Prediction: Aseradens will likely take control over Unity

Economy Minister Arvils Aseradens will become the head of Unity, Betsafe bookmakers predict. The possibility of Aseradens becoming the head of the party is given 45% probability by Betsafe.

Provisional estimate for next year’s fiscal space in Latvia is EUR 60 million

Next year’s fiscal space has been estimated at EUR 60 million, as noted by Finance Minister Dana Reizniece-Ozola, adding that a more precise estimate will be available at the end of August.

Reconstruction of Vilnius airport runway concludes; aircraft return to Vilnius

On Thursday, 17 August, Vilnius airport’s runway was festively opened. This was the most massive reconstruction for the airport in the past 20 years. It was a unique project for Lithuania and all of Europe, airport representatives say.

Islamic State terrorist group takes responsibility for Barcelona attack

The recent terrorist attack in Barcelona, in which a shuttle bus rammed a crowd of people on La Rambla, killing 13 and injuring at least 100, has become this week’s topic.

Weather in Latvia to be warm but rainy on weekends

The sun will appear every now and then between clouds on Friday, 18 August. Still, some rain is expected, especially in the afternoon in Latvia’s eastern regions, where thunderstorms may appear. Rain is expected to reach the capital in the afternoon. Wind will draw in from the south. Air temperature will reach +21° C… +26° C, according to State Environment, Geology and Meteorology Centre.

Latvia’s export growth was moderately rapid in the first six months of 2017

Compared with the same period of 2016, Latvia experienced a moderately rapid export growth in the first six months of 2017, according to data published by Eurostat on Thursday, 17 August.

Latvia’s annual inflation in July was one of the highest in Europe

Inflation indexes in Latvia and the UK both reached 2.6% in July, which is one of the highest indexes in the European Union, according to data published by Eurostat on Thursday, 17 August.

Kirsis withdraws his candidacy in favour of Aseradens

Riga City Council member Vilnis Kirsis has decided to withdraw his candidacy from the race to become chairman of Unity in favour of a different candidate – Economy Minister Arvils Aseradens.

Rinkevics expresses Latvia’s interest in maintaining political consultations with Palestine

On Thursday, 17 August, Latvia’s Foreign Affairs Minister Edgars Rinkevics met with the leader of Palestine’s diplomatic mission in Latvia, ambassador Taissir Al Adjouri, to discuss mutual relations between Latvia and Palestine and the peace process in the Middle East.

Putin grins to the world’s seven billionth baby, Lithuania wary of border incidents

Russian President Vladimir Putin paid a visit this Wednesday to Kaliningrad, the westernmost point of Russia, but the reports about his trip in the Russian enclave and over the border in Lithuania were strikingly different.

Survey: red considered the safest colour for a car

Most Latvian drivers consider red to be the safest colour for a car. The most popular, however, is black, according to results of a survey by Virši-A fuel trader.

airBaltic’s number of carried passengers reaches a record in second consecutive month

Latvian airBaltic airline carried 393,312 passengers in July 2017, which is 21% more than the same period last year. The number of passengers carried by airBaltic remains the highest it has ever been in the airline’s history, BNN was informed by the company.

Brivais vilnis: nearly all fish processing companies are experiencing losses

Currently nearly all fish processing companies in Latvia are experiencing major or minor losses, says Brivais vilnis chairman Arnols Babris.

American helicopters to perform low-altitude flights within Latvia’s airspace

U.S. Air Force Brigade’s Task Force Phoenix helicopters, which are stationed in Latvia as part of Atlantic Resolve operation, will be performing low-altitude flights from 16:00 to 18:00 from Lielvarde to Dobele on Friday, 18 August.

Healthcare Ministry’s state secretary Karlis Ketners may be replaced

Latvian Healthcare Ministry may replace its state secretary Karlis Ketners. It is possible he will be transferred to work at Finance Ministry, as reported by LTV.

Suspects in Europe's insecticide egg scandal before Dutch court

In the Netherlands, two men have been in court in relation to the scandal of eggs containing banned insecticide that has caused an EU-wide health scare and cost millions of euros of damages.

Indian national with fake documents apprehended on Latvian border

An Indian citizen travelling from Moscow on a bus was caught at Terehovo border control point in Latvia for presenting officers a fake EU family member’s resident card. No criminal process was launched. The person returned to the country he was travelling from.

Latvijas dzelzceļš will not have to pay dividends from last year’s profits

The government decided on Wednesday, 16 August, that Latvijas dzelzceļš will not have to pay dividends from last year’s profits, which were EUR 880,998.

Latvian citizenship provided to 103 people

The Cabinet of Ministers has issued an order to provide Latvian citizenship to 103 people through naturalization.

Estonian Inbank's profits reach EUR 5.7 million in six months

Estonian financial services' provided Inbank made a profit of 5.7 million euros in the first half of 2017, which is a 429.4% increase compared to the respective period in 2016.

Agriculture Ministry invites residents to sign up for measures to support fisheries

From 21 August onward, Rural Support Service plans to start accepting applications for projects to receive support from European Maritime and Fisheries Fund’s action plan for development of fisheries in 2014-2020 as part of projects Innovation, Productive Investments in Aquaculture and Fishing and Aquaculture project processing.

Newest comments