RIGA - The law on solidarity contributions should be viewed positively from the point of view of local growing banks, as it will intensify competition with large banks for certain lending transactions, Roberts Idelsons, Chairman of the Board of Signet Bank, told LETA in an interview.
He reminded that the law currently includes a provision that banks that grow their lending to a certain extent will be able to receive a rebate of up to 100 percent on their contribution. Idelsons predicted that Signet Bank could qualify for a 100 percent discount at least in the first year as the bank plans to grow its loan portfolio by more than 20 percent next year.
"Of course the big banks are looking negatively at this bill. Therefore, they will probably be less active in lending than they have been in the past, perhaps pricing the tax into their interest rates. In turn, we may find it easier to compete for certain lending business," said the banker.
However, Idelsons also stressed that the public administration should not "look at banks as ATMs where you can just walk up and get money all the time when you need it".
He also pointed out that in a few years banks have gone from paying no tax at all on their profits to having to pay up to 50 percent of their profits in tax.
Idelsons reminded that previously many banks invested their profits in capital rather than paying dividends to their owners and were therefore subject to a provision in the law that allowed them to apply a 0 percent corporate income tax rate on undistributed profits. In 2024, a 20 percent surcharge on the corporate income tax has been introduced for credit institutions, regardless of whether or not profits are distributed as dividends, while in 2025 banks that do not qualify for the rebate will have to pay the full solidarity contribution.
"If you put it all together, the tax burden on banks' profits has gone from 0 percent to 50 percent, which can vary from bank to bank. Of course, it is clear that this is too much for any sector of the economy. Therefore, if we now live with the paradigm that banks have to pay 50 percent of their profits in tax and everyone else does not, then this will lead to disastrous results, and I think that politicians and civil servants are also aware of this. That is why I do not think that the solidarity contribution will be maintained in the long term," said Idelsons.
As reported, the Saeima has approved in principle a bill on the solidarity contribution, which will oblige credit institutions registered in Latvia and branches of credit institutions to pay the solidarity contribution for the next three years. The solidarity contribution is expected to raise EUR 96 million for the budget in 2025, EUR 60.8 million in 2026 and EUR 66 million in 2027.
Please enter your username and password.
2025 © The Baltic Times /Cookies Policy Privacy Policy
