Wages continue to rise while high earner complains about new tax

Wages in Latvia continue to rise at a considerable rate according to quarterly data released by the Central Statistics Bureau (CSB) on Friday.

In the second quarter of 2015 average monthly gross wages and salaries in the country reached €815.

Compared to the second quarter of the previous year, they have increased by 6.9%, slightly accelerating the annual increase rate of 6.3% in the first quarter of this year.

In the private sector the average monthly wages and salaries amounted to €792, while public sector workers fared better on €857.

In the private sector wages and salaries rose by 7.8% annually, and in the public sector by 5.3%.

One of the causes of Latvia's spectacular boom in 2005-7 and even more spectacular bust in 2008-10 were runaway wages that outstripped productivity gains. Economists have warned of the dangers of falling into the same trap again, but luckily the rate of wage increases has yet to reach the stratospheric levels of the boom years. 

The latest data comes against the background of government wrangles over attempts to raise the minimum wage from its current level of €360 per month.

In a contrasting controversy, high wage earners  are unsurprisingly objecting to efforts to make them pay more in tax under new proposals that would apply only to those making more than €4,000 per month.

In dozens of tweets in recent days, high-flying businessman Juris Gulbis, CEO and Chairman of the majority state-owned Lattelecom telecom firm has been arguing that the so-called 'Solidarity Tax' is unfair.

Gulbis, who according to his official declaration took home an annual €392,000 pay packet last year, argued that the tax should be extended to include "all revenue" (such as company dividends).

"They pay just 10% tax, we pay 56%!" he said in another tweet, and claimed that an incredible 40% of the workforce works cash-in-hand without paying any taxes at all.

According to the Finance Ministry, only around 4,700 individuals make enough money to qualify for the new tax which would in effect see Latvia moving from a fully flat-rate tax regime to one with an element of progressivity. At the moment, the tax burden on people earning just minimum wage is almost the same as that of people earning €8,000 per month, the Finance Ministry has stated.

The tax would remove the current cap on social security payments.

"We 4,700 are not willing to pay more without full collection of taxes from all taking place," Gulbis said.

 

"Solidarity with those who do not pay taxes and millions of recipients of dividends who pays 10%. Do they have no shame?" complained Gulbis.

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