Major tax changes possible in 2021 in Latvia

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The government coalition might introduce major changes in Latvia’s tax system in 2021, but is hesitant of making any significant adjustments already in 2020, Dmitrijs Golubevs, New Unity’s representative on the coalition’s tax policy committee, told LETA on July 29.

In the talks held so far, New Unity has expressed the opinion that tax changes already in 2020 would be highly undesirable because of the necessity to preserve the stability of the tax system, and that more significant changes should be made in 2021. Asked about the possibility of raising the minimum wage next year, the politician agreed with Finance Minister Jānis Reirs (New Unity) that this proposal has to be discussed with social partners.

Golubevs said that the idea to raise the minimum wage to 500 euros in 2020 would be a “major blow to businesses, especially in the regions”. If the coalition agrees to raise the minimum wage already in 2020, the increase should be more gradual, Golubevs said.

When it comes to 2021, it would be necessary to agree on adjustments to the “slightly entangled” tax system, which currently includes a progressive personal income tax, a solidarity tax and a nontaxable minimum income.

Earlier, Prime Minister Krišjānis Kariņš (New Unity) said in an interview with Latvian Television that increasing the minimum non-taxable income would make more sense than raising the minimum wage.

According to the premier, one government partner insists on raising the minimum wage, but no final decision has as yet been reached and so the discussions continue.

Kariņš believes that it is important to raise the non-taxable minimum wage, as raising the minimum wage would drive up wage inflation.

The coalition committee on tax policy has agreed in principle to move towards raising the monthly minimum wage in Latvia to 500 euros in 2020, Saeima member Krišjānis Feldmanis (New Conservative Party) told journalists.

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