Government supports Finance Ministry's tax shake-up

Take note – story published 7 years ago

The government on May 9 supported the Finance Ministry's tax reform plan for 2018-2021, but did not produce a verdict over several yet-unresolved problems, including healthcare financing.

The tax reform stipulates two personal income tax basic rates: 20% for annual incomes of up to €45,000, and 23% on annual incomes higher than €45,000. Tax-exempt differentiated minimum income will be increased to €250 a month, and tax breaks for dependents will also be raised.

As a result of the tax reform, non-taxable minimum income for pensioners will be raised from €235 a month now to €250 in 2018, €270 in 2019, and €300 in 2020. The minimum monthly wage will be increased to €430 from the current €380.

The so-called solidarity tax will be scrapped as part of the tax reform, and the system of corporate taxes will be altered - corporate tax of 20% will apply to distributed profit.

The microenterprise status will apply to companies with annual turnover of up to €40,000, down from €100,000 now, and a 20% corporate tax will apply to microenterprises' dividends. Improvements are also planned for the so-called lifestyle businesses.

Taxes on slot machines will be raised, and personal income tax will apply to gambling wins exceeding €3,000. Excise tax rates will also be gradually increased in accordance with excise tax changes in the other Baltic countries.

The tax reform stipulates a number of restrictions concerning personal income tax payers' justified education, medical and other expenses, individuals' donations to political parties, contributions to private pension funds and life insurance, as well as restrictions on corporate income tax breaks for companies that donate to charity.

The Finance Ministry has developed a special mechanism to compensate municipal budgets for any losses they may sustain as a result of the tax reform.

The value added tax rate will not change, said the Finance Ministry.

Excise tax rates on alcoholic beverages and beer, fuel and tobacco products are to be hiked as part of the reform.

The tax reform legislation and related bills will be submitted to Saeima on June 19, and the parliament could endorse them in the second reading on July 12.

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