RIGA - Next year Latvia’s budget will be as large as never before and exceed EUR 10 billion, Prime Minister Krisjanis Karins (New Unity) said today in an interview with the Morning Panorama program of Latvian Television.
Thanks to economic growth, the budget’s “net increase” is expected to exceed EUR 500 million in 2020, the prime minister said. “The economy is growing, which means that activity continues to grow and tax payments continue to grow, as so does the budget,” he said.
When reminded about the slowing pace of economic growth in recent months, the prime minister compared the process with a plane taking off. “It’s like a plane taking off – in the beginning the climb is very steep, then it becomes more gradual, but it still is a climb, and so we too are still in the growth phase, which is very good and we really have nothing to complain about”.
However, ministries’ excessive financial demands represent a challenge, Karins admitted, adding that if all the legitimate interests and wishes of the coalition partners are met a surplus in the 2020 budget cannot be achieved. “We, politicians, the five political parties, need to come to an agreement on how to distribute the [budget] increase fairly,” the premier said.
Asked to elaborate on tax changes planned for next year, Karins underlined the necessity to support the lowest-paid employees, which would be one of the instruments for fighting shadow economy. In Latvia, the tax burden on the lowest-paid employees is one of the biggest in the region, Karins noted.
The prime minister believes that in Latvia’s situation the easiest way to help the lowest-paid population would be to raise nontaxable minimum income, not the minimum wage. “If we raise the minimum wage, the tax remains high and people see little benefit. This would only benefit the Treasury, not the people,” Karins said.
The premier also said that Latvia’s tax policy should be planned in a three-year perspective and that taxes should only be changed once in three years.
Commenting on various tax regimes currently in use in Latvia, the premier said that the tax regime for microenterprises is unfair relative to other businesses and should be changed but that such changes must not be rushed.
Atis Zakatistovs (KPV LV), head of the coalition’s tax policy committee, said earlier that the 2020 budget’s fiscal space would be quite positive, but promised to give more specific estimates in the nearest future.
As reported, the Cabinet of Ministers at an extraordinary meeting on April 15 approved Latvia’s Stability Program 2019-2020, projecting a negative fiscal space of minus EUR 11.9 million for 2020.
Earlier, Zakatistivs projected that the amount of money saved by revising budget expenditures will be significantly larger than the EUR 50 million saved last year. He said that the total amount saved in the budget will be known on August 20 and that the financing will be allocated for prioritized needs on which politicians have yet to agree.