RIGA - Foreign investors are urging the Latvian government to continue shifting the tax burden from the labor force onto consumption and real estate, as board chairman of the Foreign Investors Council in Latvia, Gunnar Ljungdahl, says in an interview with newspaper Biznes&Baltija, reports Nozare.lv. According to foreign investors, the Latvian government’s most important task is to continue tax reforms.
“The government must understand that revenues must come from real estate and consumption taxes and not from the labor force. This will also contribute to combating the shadow economy. It is much harder to cheat with a real estate tax than it is to hide one’s income,” said Ljungdahl.
Ljungdahl also positively evaluated Prime Minister Valdis Dombrovskis’ (Unity) governments efforts to improve the economic situation in the country, adding though that there is still much to be done. As one example, he mentioned the Latvian education system, which is still too “inflated” - according to various data there are 53 to 60 higher education institutions in Latvia, with the country’s population being only 2.2 million people. “Foreigners find this number too large, especially taking into account the demographic trends,” pointed out Ljungdahl.
Commenting on the foreign investors’ opinion on Latvia, Ljungdahl emphasized that it has improved. “During the crisis it was very low. The international media did not spare Latvia. Now the situation has changed. The local business seems optimistic and this optimism is conveyed abroad. Latvia is a role model now,” said Ljungdahl.
The FICIL chief also expressed concerns about the demographic situation in Latvia. “I am worried that politicians do not understand the complexity of the current demographic situation. Latvia’s population is constantly decreasing. The average birth rate is 1.4 children per woman. In order to maintain the population this figure needs to be larger than two,” he pointed out.
When Ljungdahl came to Latvia, in 1993, the country’s population was 2.7 million, then 2.5 million in 1997, but now it is just 2.2 million. “This problem must be solved. However, I think politicians have a short-term conception. In ten years it will be too late,” said Ljungdahl.