Saeima approves reducing VAT and personal income tax rates in the first reading

RIGA - On May 17, Saeima almost unanimously approved a bill reducing the value added tax and the personal income tax in the first reading.

The bill is yet to be reviewed in the second reading, most probably on May 24.

The bill stipulates that the VAT rate will be reduced one percentage point on July 1 this year, from the current 22 percent to 21 percent, whereas personal income tax will be reduced from 25 percent to 24 percent as of Jan. 1 next year.

Personal income tax will be further reduced to 22 percent as of Jan. 1, 2014, and to 20 percent in 2015.

The goal is to ensure that labor taxes in Latvia are similar to those in Estonia and Lithuania, the lower taxes are also hoped to reduce poverty and structural unemployment risks, as well as tax evasion, the Finance Ministry explained earlier.