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 governmenthas told the IMF that they may again raise the value-added-tax to get to theelusive 3 percent budget deficit by 2011.

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

The letter to IMF director Dominique Strauss-Kahn was made public andexplained the difficulty Latviais having with reaching the budget deficit.

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

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

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

On a positive note however, with the money from theinternational loans, reforms in the health care, education and publicadministration sectors are due to be started, saving an estimated 2 percent ofGDP from 2010.