Financial Services, Latvia, Taxation

The prime minister said that he appreciated the contribution provided by entrepreneurs’ organizations to preparing the reform, but that the “finish line” can only be reached by working together and listening to one another. Kucinskis believes that the entrepreneurs’ objections to the reform plans are debatable and that the truth is somewhere in the middle.

Although some argue that benefits from the reform will be too small, the prime minister said the gains would be substantial even if they do not meet all entrepreneurs’ expectations. In Kucinskis’ words, the original tax proposals had threatened institutions that are financed from the government budget.

“I consider the agreement with the entrepreneurs still valid. I am not accepting any reproaches because it is written in the agreement that the objective is to ensure that tax revenue make up 32% or 33% of GDP. The first proposal, which was worked out by the Latvian Chamber of Commerce and Industry (LCCI) and the Bank of Latvia envisaged 28%  of GDP,” Kucinskus said.

Commenting on solutions proposed for funding the health sector, the prime minister said that health care financing has been analyzed in great detailed and that now it is time to take the final decisions on how the system will be working in the future.

“To me, the big unanswered question is how to provide health insurance to those people that do not pay taxes,” Kucinskis said, adding that not all of these people should be required to pay one and the same health care tax.

As reported, the government coalition has agreed to propose differentiated personal income tax rates – 20% on annual income that does not exceed EUR 20,000, 23% on annual income between EUR 20,000 and EUR 55,000, and 31 percent on annual income exceeding EUR 55,000. The so-called solidarity tax on high salaries will be abolished.

The coalition also agreed to exempt reinvested profit from taxation to maintain businesses’ competitiveness.

The monthly nontaxable minimum income would be gradually raised to EUR 200 in 2018, to EUR 230 in 2019 and to EUR 250 in 2020.

The agreement also provides for raising the minimum wage.