RIGA - A task force set up by the Finance Ministry said on Aug. 5 that it would not propose a further lowering of Latvia's corporate tax rate of 15 percent as some politicians have suggested, adding that certain tax benefits would be of greater benefit.
The Finance Ministry reported that its working group concluded that dropping the tax rate to 12.5 percent, as Deputy Prime Minister Ainars Slesers has recommended, would not bring the expected result.
Latvia already has one of the lowest tax rates in the EU, with only Ireland boasting lower taxes, the ministry said.
The group also proposed that the 40 percent corporate tax cut for investments larger than 10 million lats (15.4 million euros) be dropped, as it does not bring the desired effect of larger investments.
The group suggested that the Economy Ministry should calculate what benefits the state has gained from the previous reduction in corporate tax rates (from 25 percent to 15 percent) implemented gradually over the past few years.
Economy Minister Juris Lujans said that dropping the corporate tax rate boosts revenues rather than decreases them and said that he would even be prepared to reduce the corporate tax rate to 10 percent.
Finance Minister Oskars Spurdzins has said that the country could not afford to drop the tax rate further, though such a step could be considered after 2007.
The Latvian Employers Confederation director general, Elina Egle, said that the tax rate was already low and the government should focus on tax administration.
The working group backed a suggestion by the Economy Ministry to increase the rates used for calculating depreciation of corporate assets.