Budget, Financial Services, Latvia, Taxation

After hearing the Health Ministry’s report on the amendments necessary to the Healthcare Financing Law, Finance Minister Janis Reirs (New Unity) pointed to the problem that the health system is currently financed by around 600,000 taxpayers although Latvia’s employed population is about one mln strong. The finance minister believes that the situation might be solved by reducing the number of various tax regimes. There are currently seven tax regimes in Latvia.

Health Minister Ilze Vinkele (For Development/For) agreed that the Health Ministry’s proposals would affect a “broader area” than just the health sector and that the seven taxation regimes should be revised.

Interior Minister Sandis Girgens (KPV LV) called on the ministers to start considering a tax regime that would encourage people to pay their taxes. “A tax rate that does not encourage to pay the tax should be scrapped,” the minister said.

On hearing the ministers’ arguments, Prime Minister Karins indicated that the many taxation regimes are not advantageous in the long term as they prevent the taxpayers from ensuring their future.

“It would be irresponsible to consider the Health Ministry’s proposal without changing the system as a whole. We will therefore have to decide on changes in the taxation system. Perhaps, this has to be dome even before 2021. But if we want to change something, the decisions have to be farsighted,” the prime minister said.

Karins said that the taxation system has to be fair and equitable and that the government must not allow its deterioration.

“Our government will also carry out a territorial reform, which will affect the school system, healthcare and taxes. We are not taking any decisions today, but we are publicly launching a debate on tax changes,” Karins said.

The discussion in the government started after the health minister proposed a new mandatory health insurance solution, which would apply to all payers of mandatory social security contributions. The rate of the social security contributions would be raised by one percentage point also for those employees whose employers do not pay this tax in the general tax regime, as well as for employees working in microenterprises.