Latvian govt approves next year’s draft budget

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On Monday evening, at an extraordinary Cabinet meeting behind the closed doors, the Latvian government approved the draft national budget for 2016, Finance Minister Janis Reirs told BNS after the meeting.

The government reached the final agreement on the main aspects to be approved in the context of the 2016 draft budget, BNS was told at the Finance Ministry.

Among other things, the minimum monthly wage is to be raised to 370 from 360 euros, the universal minimum non-taxable income is to be increased by 10 euros to 85 euros a month, plus a differentiated minimum non-taxable income will be introduced as well.

"The tax changes that have been made in respect of employees so far affected all employed persons to an equal extent, failing to lessen the problems of [income] inequality and regressivity in the tax system. Therefore the proposals for the next year’s budget are intended to bring us closer to the progressivity of taxes and solidarity in narrowing the income gap which are among the main objectives of this government," said Reirs.

Gradual introduction of the differentiated minimum non-taxable income would lead to a minimum non-taxable monthly income of 160 euros for low-wage earners in 2020, the ministry said.        

The solidarity tax, applying to 4,700 of high-wage earners receiving over 4,000 euros a month, would correct the injustice of certain individuals paying less taxes from their wages than others. The tax would also bring additional revenues to the social budget, the Finance Ministry said, adding that it intended to revise also the existing tax rules regarding the capital gains and consumption taxes. 

The ministry underlined that most of the tax hikes planned in the next year’s budget would not affect the general public but only select groups of tax payers. Other tax increases would hit those with unhealthy habits as excise tax will be raised on tobacco leaves, liquids for electronic cigarettes and alcoholic drinks.

The government upheld additional allocations totaling nearly 1.2 million euros requested by independent institutions for urgent measures, including the financing for public broadcasters to facilitate consolidation of the Latvian society, strengthen the national identity and the position of the Latvian language.

In total, an extra €527,196 was allocated for the Latvian Public Broadcasting - Latvian Television and Latvian Radio, which are connected to the LSM English, Latvian and Russian language news sites. 

The draft national budget for 2016 should be submitted to the parliament on September 30.

The Latvian government has agreed that the budget deficit in 2016 must not exceed one percent of GDP. 

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