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Monday 18.12.2017 | Name days: Klinta, Kristaps, Kristofers, Krists

Taukacs: we cannot afford high taxes

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Partner of the Sworn Advocates office Sorainen Janis Taukacs

It is very important for Latvia as a new country to work on the attraction of investment, where tax systems compete. Therefore we cannot afford to be a high tax regime state, believes the partner of the Sworn Advocates office Sorainen Janis Taukacs (Jānis Taukačs).

«The tax system in Latvia, in short, could be characterized to the investors as – low taxes. It is something with what we can continue to attract investments, if only we stop making reckless changes regarding taxes,» Taukacs informs the journal Lietišķā diena/Dienas bizness.

«The enterprises income tax in Latvia can be beneficial to many investors, although Estonians with their system are way ahead of us,» admits Taukacs, adding that each country’s greatest challenge has always been to keep the balance between the amount of money that is collected from business and residents, in order to maintain state functions in a way that solvency is felt and taxes are paid not avoided.

It is difficult to briefly characterize the tax system of Latvia in context of the rest of the world. «When giving presentations abroad on the tax system of the Baltics, the Estonian enterprise 0% income tax attracted the greatest attention [reinvested profit]. I believe it was quite on the psychological level… Although as I have already mentioned the enterprises income tax in Latvia can be more beneficial to many investors than the Estonian one. We have to come up with something as attractive! Another thing that I usually mention in connection with Estonia is that it is profitable to finance business through loans (companies are financed through capital and loans) – withholding tax is not applied to the interest. They do not have any restrictions for deductibility of interest. As long as the interest is in correspondence with the market prices, all contributions and withdrawals of profit are free of taxes.»

He believes that on a decade’s bases Latvia should keep the low taxes system. Priorities that should be financed with the help of tax policy must be seriously evaluated. One of the most realistic solutions would be abolition of the withholding tax rate and the introduction of holding system, in order the foreign investors would want not only to found companies in Latvia but also to develop enterprises that would be able to work across the whole Europe.

«The biggest national problem is the opinion that budget consolidation can be made on the basis of tax rates. Tax rates form only a small part of the tax legislation, therefore the areas where taxes are paid the least should be put in order, for example, the grey-sector barely pays taxes. It is good that the micro-enterprise tax has finally been introduced. I look forward to it with hopes. But we still have a number of neglected areas, which gather a large part of profit for which taxes are not paid,» considers Taukacs.


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