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

International Internet Magazine. Baltic States news & analytics Thursday, 28.03.2024, 18:51

Solidarity tax to be charged on high salaries in Latvia as of January

BC, Riga, 03.01.2016.Print version
Latvian Saeima in November 2015 passed in the final reading a bill providing for charging a much-criticized tax on high salaries, or the so called solidarity tax, which goes into effect as of January 1st, 2016, informs LETA.

The legislation was passed by 56 votes to 13, with MPs of the ruling coalition voting in support of the bill and opposition lawmakers voting against. Another 28 MPs, representing the opposition Harmony and coalition partners Unity and Greens/Farmers did not take part in the vote.

 

The solidarity tax will be levied on the part of highly-paid employees' salaries exceeding the ceiling for mandatory social security contributions. Under the current legislation, the ceiling is EUR 48,000 a year or slightly more than EUR 4,000 a month, but it is going to increase next year. According to estimates which are based on last year's data, the new tax will apply to some 4,700 working-age people in Latvia.

 

The rate of the solidarity tax has been set at 34.09%, of which 23.59% will be paid by the employer and 10.5% by the employee.

 

Unlike mandatory social security contributions, which are paid into special budgets, solidarity tax receipts will go to the government basic budget. Paying of this tax will not entitle its payers to social security guarantees like pensions, unemployment, maternity, sickness or disability benefits.

 

The government expects the solidarity tax to provide EUR 40.9 million in additional budget revenues in 2016 and EUR 46.095 million annually in 2017 and 2018.

 

The Latvian Chamber of Commerce and Industry (LCCI) has slammed the plan to introduce the solidarity tax, saying that it will increase the tax burden on labor. LCCI board chairman Janis Endzins said earlier that it was an unpredicted tax measure announced in the process of budget drafting and that it will not be conducive to Latvia's economic growth.

 

Lattelecom telecommunications company, meanwhile, said it was considering layoffs, price hikes.






Search site