Hands-off on tax policy

  • 2011-08-31
  • From wire reports

RIGA - The election campaign is on a roll, evident by the rising rhetoric among politicians that they will keep a light hand on government tax demands. Even though Latvia’s tax policy went through a series of changes during the economic crisis, from now on, political parties resolve to ensure stability and not introduce any significant changes to the main taxes, claimed the party representatives during a debate organized by Nozare.lv.
The parties promised that, in time, the tax burden will be shifted from labor to capital. However, for at least through next year, the situation will not change.

They also believe that significant efforts are required to improve tax collection and combat the shadow economy in order to increase budget revenue. There are several different views on tax policy; however, the parties agree that changes are required in the real estate tax system, such as review of cadastral values.
All for Latvia-For Fatherland and Freedom/LNNK (VL-TB/LNNK) member Einars Cilinskis said that his party is ready to discuss and take into account suggestions on how to improve the tax policy. VL-TB/LNNK proposes additional real estate tax rates depending on the taxpayer’s salary, as well as luxury and unused property taxes, along with increased tax breaks for families with dependants. As for corporate tax, the party suggests a 100 percent discount on companies’ reinvested profits, plus a new transaction tax for banks.

Zatlers Reform Party’s (ZRP) candidate for finance minister, Vjaceslavs Dombrovskis, said that ZRP also aims at reducing the tax burden. They went on to explain their plan: ZRP mainly focuses on combating the shadow economy, which currently amounts to 18 to 40 percent of Latvia’s output. The party proposes a new approach to audits, according to which audits will be carried out across an entire given sector, instead of just on separate companies. ZRP also resolves to reduce the tax burden on labor by six percent of gross wages, if tax proceeds exceed the projected figure, and transfer the tax burden from labor to real estate, with reduced value added tax rates.

Unity’s parliament group leader Dzintars Zakis believes that the reduced value-added tax rates must remain unchanged, since they provide direct assistance to local companies. Unity believes that municipalities should have more rights to decide real estate taxes in their territories. Zakis also emphasized that it is necessary to review property cadastral values and improve tax collection.

Union of Greens and Farmers member Dana Reizniece-Ozola agreed that the tax burden should be shifted from labor to capital, and added that it is also possible to increase corporate income tax.
Harmony Center’s representative, Ivars Zarins, emphasized that a stable tax policy should be the main principle, otherwise not only foreign, but also local businesses, will not be interested to work in Latvia.