Financial Services, Latvia, Taxation

Failure to do so will affect residents, as the quality and scope of municipal services will decrease, as well as preschool teachers and social workers who will not see their salaries increase next year, said the association.

During the work on the 2021 budget, the government decided to cut local governments' revenue from personal income tax by 5% next year, which is approximately EUR 91 mln. The Finance Ministry has also proposed reducing the special subsidy for local governments from EUR 187 mln to EUR 162 mln next year.

"This Finance Ministry's proposal is unacceptable to the Large Cities' Association, so discussions will have to continue to find a solution good for both sides. We understand that the government has to keep its promises, but it would be unfair to do this at local governments' expense. We trust Prime Minister Krisjanis Karins that the reduction in revenues will be compensated by the European Union's funds, and we therefore expect the Finance Ministry to come up with a detailed proposal what the compensatory mechanism will be like. And the ministry must make everything clear as soon as possible, so local governments could also plan their budgets for next year," said the Large Cities Association's Chairman, Saeima member Viktors Valainis (Greens/Farmrs).