Business, Latvia, Markets and Companies, Taxation

Elina Egle.

These protests could include enterprises temporarily halting tax payments or their operations, or other activity that could attract the attention of the government, reports LETA.

According to Employers Confederation Director General Elina Egle, further action could be decided upon after it becomes clear how the loan from the International Monetary Fund and the European Commission will be utilized, as well as how the 2009 national budget will be amended.

"We want to talk to the government about the business situation in Latvia, based on actual data on budget revenue in the first months of the year," stressed Egle.

The significant bureaucratic burden on business, the relentless competition between the private sector and the public sector where salaries have been rising, the government sector expenditures that have been growing for several years have all had their toll on the business environment in Latvia. The recent decisions of the government, which were made without listening to businessmen, for instance, raising value-added tax rate and excise tax rates, as well as increasing energy costs, have also had an impact on the business environment; as a result, Latvian enterprises' competitiveness has decreased, the Employers Confederation warns.

"We do not want Latvian businessmen to move their business to Estonia or Lithuania, where the business environment is much better than in Latvia. Latvia must protect its enterprises by offering support and access to financial instruments at reasonable costs, the economic activity in Latvia must be encouraged as well as the products and services offered by Latvian companies; domestic consumption and exports must be promoted. At this time, it is most important for the business that the government and banks understand their problems, while we, society, must be patient," said Egle.

During the talks with the government, the employers will demand the government lower the VAT base rate to 10% for those business sectors where the reduced VAT rate was applied up until December 31 last year, and where the VAT rate was raised more than fourfold, to 21%.

The Employers Confederation believes that personal income tax must be reduced from the present 23% to 20%, and solutions must be sought to compensate this decrease for local governments. This would make it possible for businessmen to continue paying taxes and not "descend" into the shadow economy. It would also make it possible for employees to receive the due social guarantees in case they lose their jobs.