Employers request changes in tax, insurance policy in Latvia

Take note – story published 1 year and 1 month ago

The largest employers' organisations in Latvia – Latvian Employers' Confederation (LDDK) and the Latvian Chamber of Commerce and Industry (LTRK) submitted a joint statement to the Ministry of Finance on the review of labor tax policy on April 3.

“Latvian labor tax and comparable payments are currently the highest among the Baltic States, as well as one of the highest at the level of the nearest region. This is reflected in both the analysis carried out by the social and cooperation partners and the comparisons calculated by international experts (“Ernst & Young”, OECD),” the organizations stated.

Some of the LTRK and LDDK proposals to reduce labor tax burden:

  • A review of the mandatory state social security contributions (VSAOI);
  • Switch from differentiated to fixed minimum income, applying it at all wage levels and gradually equating to the total maximum non-taxable minimum – first to €500, but linking it to the minimum wage in the future.
  • Currently, the amount of medical and catering costs paid by employers is set at €480 per year, or an average of €40 per month. Those limits should be revised and the amount of non-taxable expenditure should be increased accordingly and the groups of eligible expenditure should also be extended. These arrangements should also be extended to budget institutions, state and local government capital companies and employees of smaller companies.
  • The information provided by the FM shows that a sufficiently significant proportion of workers cannot fully benefit from the personal income tax (IIN). It would therefore be necessary to assess the effectiveness of existing aid instruments to achieve the policy objectives set as best as possible.

According to employers' organizations, the tax system encourage workers to be involved in the work process and miss less work for a variety of reasons, particularly because of health.

"At present, in order to maintain economic activity, employers in Latvia have to bear the highest costs in the Baltic States, which are related to incapacity for work, replacement of the ill employees, and so on. Therefore, the desire of foreign investors to pursue their business in Latvia is also diminished," said LTRK and LDDK.

As possible solutions, the two organizations propose:

  • The number of days of sick leave paid by the employer should be reduced to a level that is competitive at the level of the Baltic States (currently in Latvia 2-8 days; in Estonia 4-5 days; in Lithuania 1-2 days).
  • It would be necessary to draw up guidelines for doctors to determine the duration of the issue of sick leaves (because they should not always be issued for 10 days as is now) and to ensure monitoring of the issue of sick leaves.
  • The premiums specified in Latvian legislation are disproportionately high compared to other countries, including Lithuania and Estonia, so the amount of overtime pay should be reduced from 100% to 50%, and the amount of downtime pay should be reduced from 100% to 70%.

As an important aspect, employers stressed the availability of health care. A political agreement would be needed to strengthen the health system by increasing public budget funding. At present, 1% of the mandatory contribution from State Social Insurance is directed to the financing of health care, which can cover a relatively small part of the necessary healthcare services.

In the view of LDDK and LTRK, it would be necessary to assess the introduction of compulsory health insurance by linking the receipt of services to the payment of taxes.

LDDK and LTRK stressed that the tax system as a whole should contribute to increased participation and tax pay for employees, as this would contribute to higher budget revenue and ensure a fairer distribution of budget expenditure while working people should be able to grant themselves a sufficient social security “cushion”.


Seen a mistake?

Select text and press Ctrl+Enter to send a suggested correction to the editor

Select text and press Report a mistake to send a suggested correction to the editor

Related articles


Most important