Financial Services, Latvia, Markets and Companies, Taxation, Wages

The IMF, which is a specialized agency of the United Nations, explains that its position is based on an international convention regulating the fund's activity. The convention specifies that officials of the UN's specialized agencies are exempt from all taxation on salaries and income paid by the specialized agency, writes LETA.

Meanwhile, Latvia's position is based on the same convention, which indicates that the bilateral agreement concluded between Latvia and the IMF has precedence in the legal relations between the two entities. The Foreign Ministry explain that the said agreement clearly states that the IMF must pay taxes, as in Latvia it employs local workers.

"The exemptions in terms of tax payments on income from the IMF are applicable only to those persons who are not citizens of the state in which the IMF representation is located, and are not under that state's jurisdiction. This is clearly stated. And according to universally accepted legal principles, any citizen, any person who is employed and receives income, pays taxes," stressed Latvian Foreign Ministry spokesman Rets Plesums.

As a result, the Foreign Ministry's reply to the IMF indicates: "IMF employees who are citizens of Latvia must pay taxes on the salaries and compensation which they receive from the IMF."

The ministry make it understood that by not making social security tax and income tax payments on the salaries of its Latvian employees, the IMF is acting unlawfully.

Director of the Saeima's Foreign Affairs Committee Andris Berzins (LPP/LC) evaluated the Foreign Ministry's position as precise and correct, and has no doubts that the IMF is obliged to pay taxes on its Latvian employees' salaries. "In my view, the IMF is playing some kind of strange game here. I think that this constitutes a disrespectful attitude towards the Latvian state. On the one hand, they are saying that the Latvian government needs to use any means necessary to improve tax collection, eliminating various possible gray areas and so on and so forth, while at the same time they do not wish to pay taxes on those people who they themselves employ," said Berzins.

The correspondence between the two institutions on the matter, which began last December, continues in earnest.