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Monday 16.07.2018 | Name days: Hermīne, Estere

Economic Diary. Latvia is the only one once again

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Latvian officials are once again trying to widen the volume of information banks are required to provide at the request of State Tax Services. And they do this before similar requirements are set in the EU.

Premature requirements

Amendments to the Credit Institutions Law, that were announced this week, state specific cases when the State Revenue Service (SRS) can request information from banks. Particularly, information about a bank account, its owner or person allowed to manage it; the bank account’s state on the beginning and end period; the amount of taxes paid for interests for a specific period (if any); information or documents regarding some specific transactions, etc..

These proposals of the Finance Ministry caused objections in the Latvian Commercial Banks Association. One of the reasons for the objections was the description of the information SRS is allowed to request from the credit institutions for itself or at the request of its EU colleagues (or countries Latvia signed treaties with regarding exchange of such information). According to the Vice-President of the association Andris Rozentals, the point of “information and documents regarding specific transactions” seems too unspecific. According to him, the information that is to be presented according to this point is, at the very least, unclear.

Furthermore, as the association noted, the new amendments contain the formulation of “expected important information”. However, there is currently no agreement within the alliance as to what is meant under “expected important information”. The EC is still in the process of developing the form, using which the SRS will be able to compile requests to their colleagues from member-states. This is why the premature initiative of the Finance Ministry seems laughable.

Latvia is the only one once again

The outlook of GDP for 2012, according to the European Reconstruction and Development Bank, of all Baltic States seems entirely different. Latvia is the only country in the region to have its index increased from the previous value. The latest short-term perspective of the bank’s experts states that Baltic countries demonstrate flexibility and GDP growth before the signs of insignificant recession. Latvia’s achievements are noted above all else: “Latvia’s recovery turned out to be far more rapid than it was needed. The country should demonstrate the largest increase of GDP in the EU – at a level of 4.2%.”

As a result, Latvia’s outlook has been increased by 0.7% (from 3.5%) for 2012, Lithuania’s and Estonia’s outlooks have been reduced – from 2.8% to 2.7% and from 2.4% to 2.3% respectively. Local governments have also reviewed the values of Latvia’s economy: at first, the budget for 2012 was compiled with respect to GDP growth around 2.5%, this summer’s projection was raised to 4%.

A few words about trust

Survey results of GfK Custom Research Baltic and, that were published this week, also turned out to be interesting. As it turned out, Latvia has the lowest level of trust towards the finance sector among Baltic States (3.9 out of 7), as well as the largest number of people who take swift credits. Estonia is one the second place in terms of trust – 4.3 points. Residents of Lithuania trust the financial sector the most – 4.5 point.

It also turned out that respondents’ attitude towards separate market segments of financial services could be better than that of the industry itself. For example, Latvians often take fast credits (22% of respondents), there are 18% of respondents in Lithuania, and 5% in Estonia.

The survey carried out throughout September – October 2 interviewed internet users age 18-65. All and all, 1802 Latvian residents, 856 Lithuanian residents, and 1 003 Estonian residents were interviewed.

Budget of strife

In conclusion, one more event that is directly related to us, even though takes place outside of Latvia. This, of course, concerns the long-term budget of the EU for 2014-2020. Cyprus has proposed to save up 50 billion EUR on European funds that stimulate the development of the poorest EU countries, including Latvia. The new budget has become a reason for strife for members of the alliance. Shortly before another summit, scheduled for November 22-23, EU donors have begun heavily criticizing the offer of the European Commission to set a large amount of budget expenses at 1.03 trillion EUR in seven years’ time.

These discussed measures can become troublesome for Latvia. Currently, ones to benefit the most from the equalizing policy are the least developed countries of the EU – mainly post-soviet countries of Eastern Europe, including Latvia. One of its main goals is growing the lacking members of the alliance for the creation of an “equal” European market. The effect the European funds have on our countries economy cannot be overestimated.

The Finance Ministry notes that GDP per capita has increased from 46% from the average European level in 2004 to 58% in 2011. 3.2 billion LVL are available to us in the current planning period (2007-2013), and this is the most significant funding resource of public funding.

State Secretary of the Environment Protection and Regional Development Ministry Alexander Antonov says: “Given that equalizing policy funds have been providing more than 90% of public investments in recent years, the possible fund reduction could have a negative effect on Latvia’s economy, because we will not be able to sustain growth at the rate we were planning.”


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