Banks, Financial Services, Latvia

International Internet Magazine. Baltic States news & analytics Thursday, 13.08.2020, 03:49

Increasing budget revenue does not necessarily means rising taxes - Kazaks

BC, Riga, 08.01.2020.Print version
The need to increase Latvia's budget revenues in order to provide more funding, for instance, for health care, does not necessarily mean raising tax rates, the Bank of Latvia Governor Martins Kazaks says in an interview with LETA, adding that decisions will still be made by politicians and that the central bank only has a role of an advisor.

"Collecting more taxes does not really mean raising tax rates. Why? The most obvious example is the shadow economy. If it is possible to reduce the shadow economy, then you can collect much more money in taxes, without raising tax rates," explains Kazaks.

He also says that Latvia currently has several tax exemptions, and the question is whether they should be maintained in their current form.

"If we look at the micro-enterprise tax, the different tax regimes for self-employed or those who receive royalties, we see that these tax regimes apply to quite a broad range of employees. In addition, these people pay comparatively little for their social needs - pensions, benefits, and others. Is that adequate? Of course, it is necessary to maintain a special tax regime in certain niches. However, the micro-enterprise tax, for instance, was introduced during the crisis with a completely different purpose, and now we see that its purpose is no longer justified," explains Kazaks.

Therefore, one of the tasks of politicians will be to examine different budget revenue channels and to assess why different taxes can be paid on the same income. This would make it possible to increase budget revenue without raising tax rates.

"Raising tax rates always remains the third option when there is not enough money. The question is, for example, is the public willing to talk about a more progressive personal income tax? All kinds of changes can be put forward, the question is what the public and politicians can agree on," says Kazaks.

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