Previously the Finance Ministry had tasked the Financial and Capital Markets Commission (FKTK) to look into whether it would be possible to tax high-risk financial transactions.
Finance Minister Dana Reizniece-Ozola had said that the new charge could be introduced to increase budget revenue.
Banking transactions were to be differentiated into eight groups, with a charge being applied to the riskiest.
However, the minister said on Thursday that the government is scrapping the idea.
The proposed charge was criticized by the Association of Latvian Commercial banks, which said that imposing a charge on non-resident transactions would damage both Latvia's reputation and competitiveness.
Starting late last year, FKTK has turned against several boutique banks specializing in servicing non-resident clients.
Several banks have been doled out huge fines while Trasta was stripped of its licence and is due to be liquidated after being named in connection with numerous money laundering scandals.
As reported, last week Latvia-registered PrivatBank had its branch in Italy shut down by the Italian authorities over suspicions it was engaged in large-scale money-laundering.