Pending tax reform to be based on higher capital gains taxes and lower labor taxes

  • 2017-02-23
  • BNS/TBT Staff

RIGA - A tax reform that is being planned for Latvia could be based on increasing capital gains tax and reducing labor taxes.

During the Saeima Economic, Agricultural, Environmental and Regional Policy Committee's meeting on Wednesday, the Economics Ministry expressed support for tax reforms proposed by Latvian Chamber of Commerce and Industry and Latvian Employers' Confederation, the LCCI informed.

The Finance Ministry will present its tax reform plans in the near future and, according to unofficial information, the Finance Ministry will also support several measures proposed by employers.

According to information obtained by BNS, one of the most important changes will concern personal income tax rate, which could be reduced to 20 percent from the current 23 percent. The reduction, however, will not apply to high-income earners.

Tax-exempt minimum income will also be increased, up to EUR 300 a month according to one proposal, while non-taxable minimum for pensioners could increase to EUR 500.

Some part, possibly 1 percent, of revenue from state social insurance contributions could be allotted to health care.

In addition, capital gains tax could be increased, except for reinvested profit.

Earlier this week, Finance Ministry's Parliamentary Secretary Edgars Putra said that the Finance Ministry was considering applying 20 percent tax to capital gains that are not reinvested in companies' development.

Maximum annual turnover requirement on microenterprises could also be reduced, and excise tax could be raised on some goods, for instance, alcoholic beverages and cigarettes.

One very complicated matter that the Finance Ministry will have to analyze is the property tax, added Putra. Property tax rates differ from one local government to the next, and the actual tax amount should rather be decided by local governments, which may offer tax breaks of up to 90 percent. Therefore it would be a responsibility of every individual municipality to decide what social groups require property tax exemptions the most.

After the Finance Ministry presents its reform plan, it will be discussed by the government and in the parliament.