Fiscal maneuvering in Latvia

This year Latvia will lower some taxes levied on corporate entities while people will have to pay more in utility charges.

Starting with 2003, corporate income tax and amount of mandatory social insurance contributions will be lowered in Latvia. Corporate income tax was cut from 25 percent to 22 percent already last year, but as of Jan. 1, 2003, it will be reduced further to 19 percent.

In 2004 the corporate income tax is to be 15 percent.

The mandatory social insurance contribution rate this year will be cut from 35 percent to 33 percent. The reduction will after mainly employers as their share of social insurance contributions will be down to 24 percent from an initial 26 percent, while the social insurance contribution share payable by the employee will remain unchanged at 9 percent.

Latvia's population will have to pay more in utility charges as of this year.

In order to introduce European Union requirements that do not allow exemptions from value-added tax in respect to separate categories of goods, Latvia will introduce a lower VAT at 9 percent to be levied on water supply and sewerage services, which so far were not subject to VAT.

Levy of a full 18-percent VAT on heating services was put off in Latvia for now.

The cut-rate VAT will also be introduced in respect of some books, mass media and hotel services. Only original literature published in Latvia and medicines will remain fully VAT-exempt in Latvia for the time being.

This year Latvia will also raise excise tax on tobacco and beer.