RIGA - The Financial Ministry proposes a tax reform, suggesting to cut the personal income tax to 20%, remove a solidarity tax, and retain the microenterprise tax.
Finance Minister Dana Reizniece Ozola (Greens/Farmers) at the National Tripartite Cooperation Council meeting will inform on the planned changes in the tax policy. The Finance Ministry analyzed proposals of the Bank of Latvia, the Latvian Employers Confederation, the Latvian Chamber of Commerce and Industry, the Organization for Economic Cooperation and Development, the World Bank, Certus think tank and other organizations.
The Finance Ministry and other authors of the proposals agree that there is high labor force tax burden in Latvia, especially for low wage earners. Also, the ministry believes that a corporate tax reform is needed.
The Finance Ministry proposes to reform laborforce taxes, introducing a personal income tax at 20 percent for income of up to EUR 45,000 a year, and a tax rate of 23 percent on income above EUR 45,000 a year. The minimum wage should be raised to EUR 430 a month, and the solidarity tax should be removed. The Finance Ministry also proposes to set the differentiated non-taxable minimum at EUR 0-300 a month, with EUR 0 non-taxable minimum applied on a wage over EUR 1,350, and EUR 300 applied on a minimum wage.
The ministry proposes to apply 20 percent corporate tax on distributed profit.
The ministry explains that if now a person received EUR 910.5 a month in a gross wage, it is EUR 641.3 in net wage, while after the proposed labor tax reform, the net wage would amount to EUR 680.9.
The Finance Ministry has proposed changes in capital tax, setting a 20 percent income tax on distributed profit, and 0 percent tax on reinvested profit.
The value added tax (VAT) should be retained at 21 percent, while the reverse VAT payment should refer to a broader area, and the VAT threshold would be lowered. The ministry wants to start discussions on the gradual increase of excise tax.
The ministry has also prepared proposals in relation to microenterprise tax and patent fees. The ministry proposes to retain the microenterprise tax system, reducing the maximum turnover from the current EUR 100,000 to EUR 40,000 a year. The patent fee regime should be improved, making it simpler for the so-called lifestyle companies.
The Finance Ministry has prepared three proposals for improving the health care budget.
By introducing the tax policy reforms, the Latvian tax system should be competitive on the regional level on all aspects and predictable at least by 2020. The Finance Ministry believes that the reform will give a motivation to start the business, invest in the development of companies, attract investors, pay taxes, promote residents’ economic activity and wish to return to the job market.
2024 © The Baltic Times /Cookies Policy Privacy Policy