Latvia might introduce 5% health tax

The working group chaired by the Ministry of Finance (FM) for the review of the Latvian tax system is currently evaluating the possibility of introducing health insurance or health tax in Latvia at 5%, the Finance Minister Janis Reirs (“New Unity”) said on July 1.

The minister said that by introducing a health insurance or health tax of 5%, the total labor tax burden would not change. This health tax would consist of:

  • 1% - resources already provided for health insurance in the special budget.
  • 2% – from personal income tax (IIT); it is planned to reallocate the corresponding share of municipalities' income.
  • 2% – part of the so-called solidarity tax: insurance contributions that are included in the special or social budget.

"(..) We have assessed the development of budgets, budget spending, and we have concluded that everyone needs to participate in this social field. The State therefore invests in health on its part: social contributions will fall by 3%, and in the municipalities the income tax will fall by 2%, which will go to health care, because local governments must also be interested in enabling us to maintain the most adequate healthcare network possible, because every citizen needs this help," said Reirs.

Reirs said that this will earmark specific funds for healthcare, which will be an integral part of the budget. “Maybe there will be no increase in these funds in the first months or the first year. But this increase will be significant in the future, above all, it will be stable,” added the Minister for Finance.

According to him, the COVID-19 crisis also highlighted shortcomings in tax regimes and social guarantees. It is therefore necessary to think about the introduction of minimum social contributions in Latvia.

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