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Friday 23.08.2019 | Name days: Valgudis, Ralfs, Vitālijs

Entrepreneurs: changes in labour taxes will hurt business, however, wages will be raised

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Baltic news, News from Latvia, BNN-NEWS.COM

Director General Sandis Jansons (from left), Sworn Advocate Jānis Zelmenis, Finance Minister Andris Vilks, Operative Action Director Dace Zundure and Board Chairman Jānis Bergs

The government’s proposed social contribution increase by 2% to 35.09% is harmful and wrong because in this way the labour costs are surcharged; however, entrepreneurs affirmed that employees’ salaries will be raised next year.

The Chairman of the information technology (IT) company FMS Board Jānis Bergs indicated: if the state’s aim is to develop the export, it should consider that for producers the costs will increase, especially in the services sector, and they will become less competitive with Estonia and Lithuania, where the taxes are lower. «Consequently, there are less and less reasons why it is beneficial to develop business in Latvia,» Bergs told, emphasizing that the tax changes will increase the proportion of shadow economy.

The Finance Minister Andris Vilks told that social contributions will be raised due to the huge deficit in the social budget, which cannot be compensated, for instance, with the real estate tax (RET) increase, because it is the money of local governments. «We carried out fiscal calculations so that the overall benefit would be neutral. I agree that the RET has bigger potential if we could and want to collect a certain sum, as it has more reserves,» Vilks noted.

Jānis Zelmenis, the sworn advocate at the lawyers’ bureau BDO Zelmenis&Liberte, pointed out that he sees nothing good in the Finance Minister’s proposed budget, and nothing bad either. «The changes in the tax policy will only have a positive effect on my enterprise. In past two years, the company’s turnover has grown more than before,» Zelmenis informed.

At the same time, Bergs acknowledged that the IT sector wages will significantly increase next year, because currently, several projects have been started where large resources have to be involved, which Latvia currently does not have, and this will lead to a spiral-type salary increase.

AS Rīgas Dzirnavnieks also intends to raise workers’ salaries. The company’s Board Chairman Sandis Jansons said that during the economic downturn it was possible to attain efficiency by dismissing half of the employees, while increasing salaries for the remaining ones; thus, motivating them to work twice as fast.

When asked whether labour taxes could be changed also in 2012 budget, the Finance Minister emphasized that it will not be done. «We will find ways to increase the untaxed minimum. I think that in 2012 it will not be possible to reduce the individual income tax yet, but it should reach the Baltics’ average level. This could be done in 2013 – 2014 by reducing it to 21% or 22%. This year it was very difficult to manoeuvre, but, hopefully, we can do more next year,» Vilks asserted.

As reported previously, in an emergency meeting this week the Cabinet of Ministers approved the Bill on 2011 budget and medium-term macroeconomic development and fiscal policy framework in 2011/2013, which stipulate that starting from January 1, 2011 the social insurance payment rate per employee is 35.09%, of which the employer will pay 24.09%, but the employee – 11%. Moreover, it is planned to reduce the individual income tax from 26% to 25%. It is also scheduled to raise the value added tax (VAT) standard rate from 21% to 22%, and the reduced VAT rate – from 10% to 12%.

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