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Monday 23.07.2018 | Name days: Magda, Magone, Mērija
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Workforce tax burden: Latvia in the lead in the Baltics

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Аuthor: PantherMedia/SCANPIXWorkforce tax for an average wage recipient in Latvia is 44.2% of the total employer’s expenses on workforce. This is higher than the average index in the EU, where the workforce tax is 43.7%. This is reported by the latest SEB Baltic household financial outlook. Lithuania’s and Estonia’s workforce burdens are 40.7% and 40.1% respectively.

The largest workforce tax burden in the Baltics is noted among recipients of average wages in Latvia; it is also the seventh heaviest burden in the EU. For a working person, paid 2/3 (67%) of the average salary in Latvia, 43.4% of the employer’s total expenses per employee form taxes. Lithuania’s and Estonia’s workforce burden is equal to 38.9% and 38.8%, which is slightly less than the average index in the EU (39.6%).

In 2013, the workforce burden reduced in Latvia and Estonia. Workforce tax burden in Latvia reduced by 0.6% along with the reduction of the PIT from 25% to 24%. Therefore, a recipient of an average salary receives 48 LVL (1.2%) more annually. In spite of the PIT reduction in Latvia, the workforce tax burden remains the highest in the Baltics. The burden of this tax was also reduced in Estonia – thanks to the reduction of the unemployment insurance interest rate from 4.2% to 3%.

“The planned reduction of PIT to 20% in 2015 will allow us to bring Latvia’s workforce tax burden closer to that of other Baltic countries. However, recipients of higher wages are likely to benefit from the reduction of the workforce tax burden. This is why the next step should be the increase of tax-free benefit and benefits on dependents (children). It should be possible with the adoption of the principle of progressivity”, – SEB bank social economy expert Edmunds Rudzitis.

Ref: 102.109.109.6933


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  1. J. says:

    “Progressive tax” means an expensive bureaucratic nightmare for the tax authorities, annual time consuming tax reporting for average Joe and political struggles on who deserves the lower rates and deductions.

    A fair, simple flat tax with a fix tax free amount for everyone has the best of both worlds. Say 20% PIT with 100 LVL exempt; a low wage earner with a salary of 300 LVL pays an effective 13% tax whereas a high earner pays almost 20%.

    Bottom line is that today’s “flat tax” is in fact progressive. If all kinds of deductions are introduced (which most people refer to when they use the word “progressive”), there will be more pain than gain.

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