The LDDK president said that "practically nothing has been done" in Latvia for several years to make the economy grow faster and bigger. He said that the country should take bolder steps in labor tax policy and small business regulation to reduce taxes to a level competitive with Lithuania and Estonia.
Bite said: "We are saying that we need to be bolder. [...] In general, both employer and employee pay more in labor taxes to the state today than they do in Lithuania or Estonia. In the long run, either we are not developing as businesses or everyone who gets a wage gets less than their neighbors."
He believes that raising taxes now would be a mistake: "Clearly, raising taxes now would be a mistake. It would be a mistake because it would not make the economy grow faster or better."
Bite explained that reducing the relevant taxes to a competitive level would result in lower revenues for the state budget in the short term, but that the government is also being offered compensatory measures that should be put in place to offset this short-term reduction in revenues.
The President of the LDDK also said that the Ministry of Finance has been promising a vision on tax changes for several weeks, but the social partners have still not been presented with it.
Finance Minister Arvils Ašeradens (New Unity) earlier revealed that the coalition is still discussing how to change labor taxes, but the idea is absolutely clear - the tax burden should be shifted from labor to consumption.
The Finance Minister also came up with the idea of raising the basic rate of value-added tax (VAT) in Latvia by one percentage point, from the current 21% to 22%, in order to finance rising defence spending. This idea was criticized by the President of the Republic, Edgars Rinkēvičs.
