Financial Services, Latvia, Society, Taxation

He said the ruling coalition had agreed on a tax reform model to be presented at the meeting of the National Trilateral Cooperation Council comprising representatives of the government, trade unions and employers on Thursday, June 29.

"The ruling coalition agreed to propose differentiated personal income tax rates. A 20 percent rate will apply to the annual income up to EUR 20,000, a 23 percent rate will apply to the annual income between EUR 20,001 and EUR 55,000, and a 31%  rate will apply to the annual income above EUR 55,000," the prime minister said. Under the earlier proposal, two personal income tax rates were to be introduced - 20 percent for the annual income up to EUR 45,000 and 23% for the annual income higher than EUR 45,000.

The ruling coalition also agreed on a zero tax on reinvested profit so that Latvian companies would remain competitive. It is also planned to increase the minimum non-taxable income gradually.

The ruling coalition partners agreed that the social insurance contributions should be raised by one percentage point to ensure increase of the financing for health care.

The coalition's proposal will not result in a budget deficit. "The proposal is balanced to avoid creating any negative effects," Kucinskis said.