Government may further raise VAT in 2009

2009-01-06
TBT Staff

Despite protests and public outcry, the VAT may soon rise again.

RIGA-After receiving the first IMF loan of 589.57 million euro, the Latvian government has told the IMF that they may again raise the value-added-tax to get to the elusive 3 percent budget deficit by 2011.

The government also wrote the IMF that they may also continue to freeze and cut wages as well as conduct more large scale lay-offs.

The letter to IMF director Dominique Strauss-Kahn was made public and explained the difficulty Latvia is having with reaching the budget deficit.

The government is already planning to introduce a ten percent tax on rent profit, interest and other capital gains in 2010/ Property taxes are also set to go up.

Latvia, in addition to the IMF loan is also requesting aid from international organizations to improve their tax administration.

The letter to the IMF promises limiting budget spending to 40 percent of the GDP by cutting wages of government employees by 15 percent.

On a positive note however, with the money from the international loans, reforms in the health care, education and public administration sectors are due to be started, saving an estimated 2 percent of GDP from 2010.