Entrepreneurs ask that 'inflation bonuses' be untaxed in Latvia

Some of the big companies have started paying extras to their employees this month to compensate for high utility prices and inflation. The Latvian Chamber of Commerce and Industry (LTRK) calls on the government not to impose labor tax benefits so that employers can support a wider range of workers this month, Latvian Radio reported on January 23.

One of the companies choosing to pay some extra this month is Circle K. In the four most inflation-stricken countries – Latvia, Lithuania, Estonia, and Poland – Circle K will pay EUR 200 in benefits to employees.

Jekaterina Leidmane, the company's director of Business Support, said: "We realized that paying daily bills for a lot of people was becoming a big challenge. So we saw such a benefit as a good opportunity to support our own [..]. A total of €200 gross will be paid this winter, but not all employees will receive it. 97% of the employees of Circle K will receive that benefit, but there are people who are in leadership positions or whose incomes are higher than some level, they don't get it. Let's take care of those who have it the hardest."

Lidl Latvija's head of corporate communications, Dana Hasana, said that the company paid a one-time compensation of 30% of the monthly salary and, together with taxes, that aid amounts to more than €750,000.

"Every one of us received 30% of the pay as a premium to their monthly salary just in January. We're trying to look for different ways, even though transport aid is €40 a month, the compensation we pay to employees in stores is very useful. We're trying to be flexible [..]. If we want to motivate these people and make them interested in work or our loyalty, we probably can't do it any other way,” Hasana said.

LTRK board member Jānis Lielpēteris estimated that employees are paid benefits mainly at large companies, since energy crisis naturally also affects businesses, particularly small ones. But the LTRK is encouraging the benefit paid to employees to be exempted from the additional labor tax burden.

"If we look at an example where, say, a company with 50 employees would have devoted €100,000 to such a project, over the course of the half-year, we would come to the conclusion that around €60,000 goes directly in support of employees, while around €40 000 goes to tax mass and social contributions. This means that only in fact 60% of the aid available to entrepreneurs is real support for employees.

"In the context of our proposal, which has actually also been directed from the Ministry of Economics, but now it seems that it is the Ministry of Finance that does not support such a solution, which would actually allow a much more prominent circle of employers to also support their employees," said the LTRK representative, adding that different additional benefits for employees are the long-term investment of employers, which always pays off.

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