RIGA - The tax reform plan will be completed by the end of this week or at the beginning of the next week, and it will be the final version to be discussed by the ruling coalition, Latvian Prime Minister Maris Kucinskis (Greens/Farmers) said on the morning news program of the public Latvian Television today.
He said the ruling coalition's overall opinion of the plan was "very positive" therefore the plan would be completed in the nearest future.
The prime minister would not say exactly how large will be the budget deficit resulting from the tax reform, saying it would become clear at the beginning of the next week because agreements still had to be reached on the financing for health care and the social budget.
"If we want to catch up with the developed European countries, slow progress in not enough. We need to make our tax system very attractive," he said.
Excise tax on alcohol and, possibly, fuel may be increased as part of the tax reform but first the likely effects of the national economy and the excise tax policies in the neighbouring countries need to be considered, Kucinskis said.
He said the European Commission would not object to the budget deficit increase if Latvia could prove positive effects of the tax reform on the state budget in the future.
According to Latvia's Stability Program 2017-2020 prepared by the Finance Ministry, the planned tax reform can boost the economic growth to 5 percent by 2020 as opposed to the earlier forecast of a 3 percent growth. The ministry said that positive indirect fiscal effect from faster economic growth will be EUR 89 million in 2018 and will increase by another EUR 41 million in 2019 and by EUR 107 million in 2020.
At the same time, Latvia has to be prepared that the planned tax reform will widen its budget deficit at first, Finance Minister Dana Reizniece-Ozola (Greens/Farmers) said. The overall direct negative effect from Latvia's planned tax reform in 2018 has been estimated at EUR 235 million, according to the Stability Program 2017-2020.
"We must be prepared that the first years will be the most difficult, but no reform is easy. It is important for us to implement the reform responsibly, observing fiscal discipline," the finance minister said.