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Scramble for tax revenue begins

  • 2010-12-15
  • From wire reports

SHADOW DANCING: Valdis Dombrovskis (left) and Andris Vilks suggest that money to fill the budget gap can be found in the black economy.

RIGA - Taxes will not be raised in 2012, except for real estate, after cadastral value is adjusted, Finance Minister Andris Vilks said to the daily Diena, reports news agency LETA. “This tax must be raised, because municipalities must have money. At the moment it is difficult to say to what extent it will be raised, but it might be a triple rise. If we will be able to come forth with increasing the non-taxable minimum, then it can possibly be even more,” says Vilks.

Replying to the statement that entrepreneurs are dissatisfied with higher taxes for the third consecutive year without structural reforms, Vilks justifies the changes with the fact that in comparison with previous years, they are minor.
The finance minister admits that due to the tax alterations, the Baltic neighbors of Latvia have gained certain advantages, “however, we must understand that our economy was in a deeper crisis.”

When asked if Latvian budgetary policy is not shortsighted and, for example, is ignoring the approaching demographic crisis, Vilks says that “it is not necessary to think so much about things so far away.”
“No one knows how the economy and world models will look like. To discuss something about the year 2020 or 2030... These are distant visions. I do not think that it would be correct in the short-term to change focus towards tax policy. We see how many plans have been made already - for some 20, 30 years. Let us think more about what is happening now,” Vilks says.

In another tactic to fill government coffers, the government on Dec. 13 decided to include a resolution in the 2011 draft budget that an additional 45 million lats (64.2 million euros) would be collected in taxes next year from the shadow economy. The previous projection was to recover 15 million lats, and this is the figure that the government had agreed upon with the international lenders. However, at Prime Minister Valdis Dombrovskis’ (Unity) suggestion, this figure was increased 45 million lats, to 60 million lats in total. However, the resolve to collect an additional 45 million lats in taxes from the shadow economy will not be considered a budget consolidation measure.

Dombrovskis told reporters after the government meeting that the Employers’ Confederation, not only the opposition’s For a Good Latvia, had insisted that more money be raised in taxes from the black market. The government plans to implement the new provision by pursuing a plan for combating the shadow economy that it previously had approved, the premier explained.