Budget, Financial Services, Latvia, Taxation
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Friday, 29.03.2024, 07:18
Latvia's negative fiscal space widens to minus EUR 44.5 mln
Previously, the Finance Ministry informed that in 2019 and
the two following two years, the general government budget balance, provided
that the budget policy does not change and together with the fiscal safety
reserve, will be less than the permissible balance. That means that the fiscal
space will be negative. In 2019, it is estimated at minus EUR 34 mln.
On Tuesday, the Cabinet of Ministers approved the Finance
Ministry’s proposal to plan a fiscal reserve of 0.1 percent of GDP for this and
two following years, which would be EUR 31 mln, according to previous
estimates.
The government also approved the continuation of several
costly activities, which will increase the negative fiscal space to EUR 44.5 mln.
It was decided to allocate EUR 7.6 mln for combating
financial crime, EUR 1.5 mln for the promotion of remigration, EUR 2 mln to
support the diaspora and EUR 200,000 for the further publication of KGB files.
Reirs indicated that in order to prevent the budget deficit
from expanding beyond the permissible limit, the shortfall would be partly
financing with revenue from combating shadow economy. The Finance Ministry is
negotiating this scenario with the European Commission.
“Experience shows that when the shadow economy is reduced by
one percentage point a year, budget revenue increases by EUR 60-70 mln,” the
finance minister said, adding that more financing could be provided also by
revising expenditure.
Reirs underlined that the government is not considering tax
hikes to reduce the negative fiscal space.
Prime Minister Krisjanis Karins (New Unity) also said that
there are no plans to reduce the negative fiscal space by raising taxes. The
prime minister is confident that the Finance Ministry will find a way to
compensate for the negative fiscal space.
At a Cabinet meeting on February 8, the government is
expected the set the maximum size of budget expenditure for 2019. After that,
the government will be working for two weeks on the final version of Latvia’s
2019 budget.