Excess profits tax could be imposed on banks and energy sector in Latvia

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The Finance Ministry's working group on behalf of the government will consider imposing an excess profits tax on banks and on the energy sector companies, according to the government representatives' statements on March 20 after the coalition meeting.

Prime Minister Krišjānis Kariņš (New Unity), after the coalition meeting, acknowledged that multiple European Union (EU) countries decided to impose an excess profit tax on energy companies, taking into account last year's record profits, which are largely linked to rising energy prices.

According to him, unlike energy companies, the application of such a tax to the banking sector in the EU is not so common. In any case, the FM will have to assess what “would be the right measure that could be adopted for the banking sector”, the Prime Minister said.

He said that there are three main targets – to allow banks to issue credit more actively, reduce lending rates, and increase deposit rates. Deposit rates in Latvia are among the lowest in the EU, while loan rates are among the highest.

“We need banks to do their core business. We need banks to work,” said Kariņš.

Representatives of the coalition said that politicians have so far not discussed the rates of the possible excess profit tax. This will also have to be assessed in the FM working group. For the time being, there is no “time frame” when the FM has to make proposals for the introduction of the tax on banks and energy companies, but this should be done in the coming weeks.


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