Tax rates to drop

RIGA - The Latvian government was in a closed Cabinet session on Aug. 13, where the ministers supported, in principle, several proposed measures to boost the national budget income, reports LETA. There was also approval for the Finance Ministry’s framework for reducing taxes on the work force, i.e. the rate for the employer-covered obligatory social security payment would be cut from 11 percent to 10 percent as of Jan. 1, 2014.

Also approved was retaining the personal income tax rate next year at the current 24 percent. According to the Finance Ministry proposal, personal income tax will be reduced, starting from 2014, 1 percent annually until reaching 22 percent. The non-taxable minimum income will be increased next year by differentiating the minimum income between 45 lats (64.2 euros) and 84 lats, as well as increasing tax-breaks for dependents to 98 lats.

Prime Minister Valdis Dombrovskis (Unity) told reporters after the government meeting that the Finance Ministry would have to appraise the fiscal effect of the proposals. Work on the 2014 budget’s revenue projections will be completed, and work on the budget’s spending items and new policy initiatives will commence at the next government meeting, he said.
Some of the other proposals approved by the government include applying value added tax to luxury automobiles from Jan. 1 next year, which hope to bring in an extra 1 million lats next year, The Agriculture Ministry made proposals to extend personal income tax breaks for amounts paid as state or European Union aid to agriculture and rural development by three years, introduce compulsory social insurance contributions from royalties, proposals that deal with excise tax breaks on natural gas and auto-gas, and others.

By the next government meeting, the Finance Ministry will prepare updated fiscal framework calculations. Discussions with the government’s social and cooperation partners about the 2014 state budget framework will also continue, said the ministry.