Financial Services, Latvia, Taxation

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Latvia: coalition reaches agreement on 2021 budget and main principles of tax reform

BC, Riga, 21.09.2020.Print version
After lengthy discussions, the ruling coalition parties today reached agreement on the 2021 state budget and the main principles of the pending tax reform, writes LETA.

Prime Minister Krisjanis Karins (New Unity) told reporters after a meeting with the coalition partners that the lengthy meeting today was productive - the coalition had reached agreement on the 2021 state budget framework.

"After debates that continued for several months, we have reached agreement on the framework of the 2021 budget," said Karins.

According to the coalition parties' agreement, the minimum monthly wage will be EUR 500 as of January 1. In accordance with Saeima's decision, EUR 183 mln will be allocated for raising healthcare workers' wages. Salaries of teachers and members of universities' faculties will also increase.

The ruling coalition parties have also agreed that, in accordance with the Constitutional Court's ruling, the guaranteed minimum income will be raised from EUR 64 to EUR 109.

Close to EUR 9 mln will be allotted for the public media's exit from the advertising market, while the system of family benefits will be reformed in 2022.

Furthermore, social tax will be cut 1 percent on January 1 next year, while the threshold for differentiated nontaxable minimum income will be raised from EUR 1,200 to EUR 1,800. Minimum mandatory social contributions will be introduced on July 1.

As reported, the Cabinet of Ministers on September 2 approved the proposal to carry out tax reform in 2021, intended to promote the social protection of the country's residents.

At the government meeting on September 2, ministers reviewed the Finance Ministry's report on tax policy initiatives aimed at promoting Latvia's social sustainability and economic competitiveness. The report contains tax proposals debated in various formats by the government coalition, the government's social partners and nongovernmental organizations.

The ministry's report stresses fairness and simplicity as essential tax policy qualities, noting that the reforms are also intended to tackle people's social protection problems highlighted by the Covid-19 crisis.

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