Tax reform did not reduce inequality, says ombudsman

Latvia’s latest tax reform is not serving its purpose as the goal to reduce inequality is not being achieved, while some of its side effects are being hushed up, Ombudsman Juris Jansons told journalists February 27.

The ombudsman voiced this criticism while presenting a study assessing the tax reforms’ aspects like application of nontaxable minimum income and tax refunds, as well as effectiveness.

According to the ombudsman’s findings, the tax reform fails to promote equality, and even though the reform had been advertised as a “gift on Latvia’s centenary”, its effects have been mixed.

Jansons noted that a number of side effects stemming from the reform have been hushed up leading the situation where some groups of people are receiving tax refunds while others are facing serious tax debts.

The ombudsman is concerned that the low-income population tends to increase, while the tax reform is not helping to curb the trend.

Jansons said ironically that each resident of Latvia now has to be a bit of a lawyer, accountant and healthcare expert and that the new tax reform has not changed the situation for the better. Instead, it has increased the number of people obliged to file their income statements and tax collection is requiring larger resources as well, the ombudsman said.

Since the study has shown that the new tax reform is not reducing inequality, the Ombudsman’s Office has prepared two sets of recommendations to the government. The first set of recommendations would not require significant “maneuvers”, but the second set would require legislative adjustments, the ombudsman said.

Jansons agreed with Prime Minister Krišjānis Kariņš’ (New Unity) position that a responsible approach is necessary to tax policy changes as people need to know what to expect in the future.

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