Financial Services, Latvia, Taxation, Wages

The prime minister indicated that there is a consensus among coalition partners on the necessity to ensure the social protection of all employed people, healthcare funding, as well as pay raises for medics and teachers. 

Although the political talks on tax changes have been suspended because of the New Conservative Party's demand for raising the nontaxable minimum income to EUR 500, which other coalition partners consider to be fiscally infeasible, Karins believes that the political parties will manage to come to an agreement. 

"Any discussions are hard. We therefore asked the Finance Ministry to specify its estimates. When they are ready, we will have a much more detailed picture," the prime minister said without naming the date for resuming the tax negotiations. 

As reported, the coalition parties' talks about the proposed tax changes have come to a halt as the New Conservative Party insists on raising the monthly non-taxable minimum income to EUR 500 in 2021.

The other four coalition parties point out that increasing the non-taxable minimum income to EUR 500 would require an additional EUR 120 mln next year, which would make it difficult to meet the other commitments, such as raising salaries for medical workers and teachers. Increasing the non-taxable minimum income was one of the goals listed in the New Conservative Party's election program, and because the non-taxable minimum has not been increased yet, opposition parties often blame the party for not keeping its promises to voters.

Finance Minister Janis Reirs (New Unity) said that work on the tax reform had been put on hold as new demands were being made. The higher non-taxable minimum income proposed by the New Conservative Party is not affordable at the moment as the state will be unable to finance healthcare without expanding the range of taxpayers in the country.

The Finance Ministry's Parliamentary Secretary Atis Zakatistovs (KPV LV) also said that the talks about tax changes had come to a halt because of the New Conservative Party's claim that the non-taxable minimum income be increased to EUR 500. "This is fiscally irresponsible. Wages are a bigger priority than increasing the non-taxable minimum," said Zakatistovs.

The New Conservative Party's member Gatis Eglitis agrees that increasing the non-taxable minimum income to EUR 500 will have a big impact on the state budget, however, people will have more money to spend as the labor tax burden will decrease, therefore the actual impact of a higher non-taxable minimum income will not amount to EUR 100 mln.