As employers' push for labor tax changes has been ignored in the preparation of the country's budget for next year, talks with politicians must continue, Kaspars Gorkšs, Director General of the Employers' Confederation of Latvia, who will be the main speaker of the Saeima Sustainable Development Committee planned for Wednesday, said.
Work needs to start on improving the competitiveness of labor taxes in the region, Gorkšs said.
“Latvia has the highest labor tax burden in the region and at the same time the lowest involvement in the payment of taxes. Employers are interested in investing more money in employees' salaries and the development of their companies, so there is a need to look for ways to promote the competitiveness of the workforce and how to obtain funds to mitigate the fiscal impact of changes,“ said Gorkšs.
The government's action plan envisages a tax review, but employers believe that the only measurable indicator should not be the level of tax collectability, as is currently the case.
A non-governmental organization representing businesses – the Latvian Chamber of Commerce and industry – expresses a similar position. Its board Member, Jānis Lielpēteris, saidt that much of the work that was done in the tax change negotiations this year had to be done over with the change of government.
“Until now, in the Latvian economy, the basic approach has been how to take more of those already on the market, but it is not thought of how to allow and help companies develop in order to thus increase revenue from the fact that entrepreneurs make a profit,” said Lielpēteris.
“In this paradigm, unfortunately, we don't see change, but it's one of the things we look at with great expectations for next year. We hope that the work will result in a constructive offer, at least in the field of labor tax competitiveness, which we have been talking about relentlessly for at least five years,” said Lielpēteris.
Some positive things are expected as early as next year, for example, the possibility for the employer to cover the costs of acquiring higher education for a worker without taxation.
The opposition still hopes to switch some things around. Head of the Saeima's Sustainable Development Committee Uģis Mitrevics (National Alliance) said there will be no major changes to the country's budget next year.
“We instructed the Employers' Confederation of Latvia to prepare answers and forecasts on the competitiveness of labor tax costs and availability and costs of labor resources. We want to see LDDK's vision of how our tax costs compete with our neighbors – whether and why we are lagging behind. This is the moment of reality between the adoption of the budget at the first and second reading,“ Mitrevics said.
“Yes, it's not like historically someone swapped the budget 180 degrees, however, certain things may still be improved, especially if NGOs, the opposition, and the general public point to this,” he added.
The finance minister has already stated that wider changes to labor taxes could not be expected until a year later.
Next year's budget priorities are security, education, and health, with an additional budget of €486.4 million. The total additional support for the various priorities for 2024 is estimated at EUR 783.3 million.
The revenue of the 2024 consolidated budget is planned to be EUR 14.5 billion, while expenditure – EUR 16.2 billion. Compared to the 2023 budget, the planned revenue of the State budget in 2024 is expected to be EUR 1.763 billion higher. State budget expenditure in 2024 is planned to be 1.538 billion euros higher than in the State Budget Law 2023.
The budget bill also provides for several tax changes.