Finance Ministry to find rational solution by end-September to compensate fall in local governments' revenue next year

  • 2020-09-09
  • LETA/TBT Staff

RIGA - The Finance Ministry and the Latvian Association of Local and Regional Governments (LALRG) hope to find by the end of September a rational solution to a reduction in local governments' revenues next year, as Finance Minister Janis Reirs' (New Unity) advisor Leonids Salcevics told LETA.

Representatives from the Finance Ministry and LALRG had a meeting today to discuss the government's proposal to change the shares of revenue from personal income tax that go to the state budget and municipal budgets.

According to Salcevics, the meeting was productive. "The LALRG expressed concern about the redistribution of revenue from personal income tax and its consequences. The Finance Ministry replied that Saeima had adopted several laws, which envisage raising salaries of healthcare workers and teachers next year. This puts us in a difficult situation, where money must be distributed fairly," he said.

The Finance Ministry will consider giving local governments more rights to borrow money, and European Union funds will be used to finance different investment projects of municipalities, said Salcevics. The Finance Ministry will prepare a rational proposal by the end of September, he added.

As reported, the Finance Ministry has proposed to change the distribution of personal income tax between the state and local government budget. At present local governments receive 80 percent of personal income tax, while the remaining 20 percent are paid into the state budget. The Finance Ministry has proposed to change this distribution ratio to 75 percent and 25 percent.