Tax changes mulled by Latvian politicians

The tax policy working group has met for the first time after the summer break, and it has agreed that there will be changes in taxes. However, specific solutions have not yet come up, Latvian Television reported August 2.

The statements made by politicians contain both a wish to reduce individual taxes, increase competitiveness and take more in the budget revenue.

“We have obligations against the public to ensure the costs the way they are. Security costs. [..] The biggest, most important task is to find a balance between economy growth [and tax policy],” said Finance Minister Arvils Ašeradens (New Unity).

“What is frustrating for us – we have heard too little about boosting competitiveness and filling the holes that come with improving the tax system,” said Andris Kulbergs (United List).

"The changes in corporate tax have yet to be assessed. We saw that presentation only today and from a very long distance,” said Economics Minister Ilze Indriksone (National Alliance).

The entrepreneurs present in the working group acknowledged that there is no consensus yet. “For the time being, we are only at that stage when there is a frame, there are taxes defined, which we talked about further. We have agreed that we will start modeling on how one or the other scenarios can further affect their competitiveness and development,” Andris Bite, president of the Latvian Employers' Confederation (LDDK), said.

However, economic experts surveyed by Latvian Television agree that the aim of politicians and entrepreneurs to ensure economic growth through tax changes is not achievable.

“If we suddenly lower the labor tax by some percentage points and offset it with VAT, will we be more attractive in the eyes of investors? I doubt it very much. I am convinced that if we return to competitiveness, all we need to do is increase our productivity in Latvia, and this can only be done by investing,” said Inna Šteinbuka, Chair of the Board of Fiscal Discipline Council.

“The most obvious thing I would do would be to simplify the tax system. [..] The whole system is absurdly complicated,” said Pēteris Strautiņš, economist at Luminor Bank.

It is true that while the working group discusses tax changes, negotiations on government changes continue in the Cabinet. It is therefore not yet known whether decision-makers will be the same at the end of the year, when the reform is to be directed.

Meanwhile, on Thursday morning, Finance Minister Arvils Ašeradens told Latvian Television that changes in the tax system are only possible when inflation is stable. "We have to see how inflation develops. Tax changes are only possible when the inflation stabilizes."

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