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Wednesday 18.07.2018 | Name days: Rozālija, Roze
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Latvian government allows the reduction of taxes on labour

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe Cabinet of Ministers has approved the proposed labour tax reduction model that was developed in mind with social partners’ opinions and proposals regarding state social insurance contributions and PIT benefits.

These proposals provide for keeping PIT at 24% in 2014 and have it reduced to 22% in 2016; reduce the social insurance contributions rate for employees from 11% to 10.5%; reduce social contributions rate for employers from 24.09% to 23.59%. On top of that, it is planned to significantly increase PIT benefits for dependants from the current LVL 80 to LVL 116; increase tax-free allowance from the current LVL 45 to LVL 53, Finance Ministry reports.

If the government were to reduce PIT to 22% now, fiscal impact would be LVL -74 million. The alternative proposal, one that was approved by the government, provides a fiscal impact of -22.6 million for employees and -22.6 million for employers. The increase of tax-free allowance will create fiscal impact of -14.9 million and benefits for dependants would impact the budget at -27 million. The alternative solution provides a fiscal impact of LVL 87.1 million, which exceeds that of the original plan.

The government also approved the Transport Ministry’s proposal regarding the adoption of the practice to charge money to use state roads starting July 1, 2014. This is expected to bring around LVL 3 million to the state budget in 2014, LVL 8 million in 2015 and LVL 11 million in 2016.

The government also approved the Environmental Protection and Regional Development Ministry’s proposal to introduce new nature resource tax units (water consumption in small HES, advertisement expenses, etc.,), as well as increase nature resource tax rates. By implementing the proposals of both ministers, the fiscal impact will be LVL 4.9 million in 2014, LVL 4.7 million in 2015, LVL 4.5 million in 2016.

The government also approved the proposal of the Interior Ministry to increase state contributions for residence permit request or review of documents submitted for registration.

Further discussions of state budget related matters will be held on future meetings of the Cabinet of Ministers. The Finance Ministry reminds that, in accordance with the bill regarding medium-term budget plans for 2013, 2014 and 2016, it is planned to submit state budget proposals to the Saeima on September 27, 2013.

Ref: 102.109.109.8707


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