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Bank of Latvia governor says tax reform should continue at least partially

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Covid-19, economic instability, coronavirus, Bank of Latvia, Mārtiņš Kazāks, tax reform

Bank of Latvia governor Mārtiņš Kazāks

It would not be right to postpone the planned tax reform because of the illness spreading in Latvia because of Covid-19 coronavirus. It should be implemented at least partially, said Bank of Latvia governor Mārtiņš Kazāks in an interview to Latvijas Radio on Tuesday, 24 March.

«It is clear it will not be possible to revise the tax system, but there are some things we can do. For example, putting together the healthcare funding, as well as adopting changes to the micro enterprises tax system,» said Kazāks.

He said the government and the Saeima currently have other worries. Nevertheless, he said, it is still possible to prepare certain stages of the tax reform. «If we notice in the second half of the year it is not possible to implement changes, it is always possible to postpone the date of the reform’s implementation – by six months or a whole year,» said Kazāks.

The governor of the Bank of Latvia said reforms must not be halted just because of the crisis. This includes the administrative territorial reform.

Read also: People under special tax regime may be given right to receive unemployed benefits

As previously reported, the newly-elected Fiscal Discipline Council has proposed postponing the tax reform, considering the uncertain economic development and high risk level. The council also proposed postponing other fiscally sensitive activities until the situation has stabilized.

The new council admits that under the current state of emergency caused by the spread of Covid-19 pandemic the situation in the economy is volatile and hard to predict.

At the same time, the council predicts it will be especially problematic to reach Finance Ministry’s estimated growth indexes in the coming months, adding that revenue will be below planned indexes and budget deficit will increase further.

Prime Minister Krišjānis Kariņš has reported that Covid-19 must not be allowed to put a stop to Latvia’s tax system’s improvement plans.

The prime minister said the crisis has outlined major problems in the tax system, especially in regards to preferential tax regimes. Tax improvements have to be implemented because people who do not pay taxes are not socially insured. According to Kariņš, this is unfair because people who pay all the taxes have to carry a double burden.


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