Tax system should not be changed during a crisis period - PM

  • 2022-09-23
  • LETA/TBT Staff

RIGA - During a crisis, the tax system should not be changed and what should be done in the future should be thought about when the crisis has subsided, Prime Minister Krisjanis Karins, who is New Unity's PM candidate for the upcoming Saeima elections, told LETA in an interview.

"When it is clear that the crisis is over - and all crises end eventually - we should continue in two directions. One is to continue reducing the tax burden, especially for lower wages. This direction should be resumed. The other is to continue the consolidation of the various tax regimes. Ideally there should be only two - the basic regime, which would be paid by companies, and the individual tax regime. In addition, these two regimes should be sensibly adjusted," said Karins.

He also expressed the opinion that currently there is no need to reduce the value added tax (VAT) rate for a wider range of food products or fuel, which is advocated by several parties before the elections, because experience shows that it does not reduce prices for consumers, while the state remains without significant income.

"I've spoken to my European colleagues and what I'm being told by prime ministers from countries where VAT rates have been reduced is that this is a tough road. Basically, wherever VAT is reduced, it's not consumers who benefit, but traders and manufacturers. We have very serious needs - including we have to buy air defense systems, we have to increase the number of soldiers, we have needs in medicine, education, etc. In the budget, there are more needs than opportunities, and VAT is one of the main sources of tax income," the current prime minister emphasized.

He reminded that after the reduction of VAT, the prices for buyers of fruits and vegetables characteristic of Latvia have not changed significantly, but the state has lost income.

"In addition, it is politically impossible to restore the VAT rate now, because if the costs go down, manufacturers and traders keep the money for themselves, if they go up, they push it on the consumer. Therefore, I believe that these basic tax rates should not be treated lightly. There are many other support tools that we use and can use in the future," emphasized Karins.

Among other things, he admitted that it is already necessary to think about increasing the minimum wage, the only question is how fast it can be afforded to raise it so that it would not contribute to inflation and make companies less competitive.