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Government supports Finance Ministry's tax reform

  • 2017-05-10
  • BNS/TBT Staff

RIGA - The government today supported the Finance Ministry's tax policy principles for 2018-2021, but discussions about several yet-unresolved problems, such as health care financing, will continue until June 1.

The tax reform stipulates two personal income tax basic rates: 20 percent for annual incomes of up to EUR 45,000, and 23 percent on annual incomes higher than EUR 45,000. Tax-exempt differentiated minimum income will be increased to EUR 250 a month, and tax breaks for dependents will also be raised.

As a result of the tax reform, non-taxable minimum income for pensioners will be raised from EUR 235 a month now to EUR 250 in 2018, EUR 270 in 2019, and EUR 300 in 2020. Minimum monthly wage will be increased to EUR 430 from the current EUR 380.

The so-called solidarity tax will be scrapped as part of the tax reform, and the system of corporate taxes will be altered - the corporate tax of 20 percent will apply to distributed profit.

The microenterprise status will apply to companies with annual turnover of up to EUR 40,000, down from EUR 100,000 now, and a 20 percent corporate tax will apply to micro enterprises' dividends. Improvements are also planned for the so-called lifestyle businesses.

Taxes on slot machines will be raised, and personal income tax will apply to gambling wins exceeding EUR 3,000. Excise tax rates will also be gradually increased in accordance with excise tax changes in the other Baltic countries.

The tax reform stipulates a number of restrictions concerning personal income taxpayers' justified education, medical and other expenses, individuals' donations to political parties, contributions to private pension funds and life insurance, as well as restrictions on corporate income tax breaks for companies that donate to charity.

The Finance Ministry has developed a special mechanism to compensate municipal budgets for any losses they may sustain as a result of the tax reform.

The value added tax rate will not change said the Finance Ministry.

The reform also envisages higher excise tax rates on alcoholic beverages and beer, fuel and tobacco products.

The tax reform legislation and related bills will be submitted to Saeima on June 19, and the parliament could endorse them in the second reading on July 12.