Coalition to scrap social payments but raise tax for small businesses

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Coalition parties on Wednesday backed away from the plan to introduce mandatory minimum social insurance contributions for small businesses, commonly called 'micro enterprises' in Latvia. However the tax for these companies will be upped to 15% from the current 9%.

Following objections by entrepreneurs and NGOs, coalition parties will not introduce the norm, adopted in 2015, that would see all employees - including those working part-time or receiving less than the minimum wage - paying mandatory minimum social insurance contributions (at €97 a month per current wages).

The coalition plans to make up for the missing social budget funds by raising the micro enterprise tax to 15%.

PM Māris Kučinskis said that in the previous plan - which stipulated exceptions from the social payments for less-well-off groups like senior people, students and people with disabilities - would have made it impossible to administer the tax starting from next year.

PM Māris Kučinskis is yet to discuss details of the proposal with the Unity faction that had questions over the matter.

On November 23 more than 200 people protested against phasing out the microenterprise tax regime, but PM Kučinskis confirmed that the tax will still be removed gradually. Small business owners also voiced disquiet over the decision to introduce minimum social insurance contributions for payers of the microenterprise tax.

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