Financial Services, Latvia

The 2021 memorandum of agreement was discussed at a meeting of the LALRG council today, which was also attended by Prime Minister Krisjanis Karins (New Unity), Finance Minister Janis Reirs (New Unity) and Environmental Protection and Regional Development Minister Juris Puce (For Development/For).

The LALRG council decided unanimously to postpone signing of the memorandum in order to continue discussions with the Finance Ministry and reach a compromise on the reduction in the municipal budget revenue proposed by the government. The discussions will continue until the 2021 budget bill is submitted to the government, that is, until October 15, said Uzule.

She said that the main stumbling block was the Finance Ministry's proposal to change the proportions of revenue from personal income tax that go to the state budget and the municipal budget. According to the ministry's proposal, local governments' share in revenue from personal income tax will be reduced to 75% next year. This is unacceptable to local governments, which insist that a compromise must be found on support for local governments whose revenues will be affected the most.

According to the LALRG Chairman Gints Kaminskis, 77 local governments' revenues will decrease by more than 4% next year as a result of the changes proposed by the Finance Ministry. LALRG therefore proposes that the government allocates an additional EUR 9.2 mln for these local governments next year.