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Latvia’s government’s tax policy proposals threaten existence of several industries – business organization

The tax policy proposals for 2024-2026 supported by the new government threaten the ability of several industries not only to compete, but also to exist, according to a statement released by the Latvian Employers’ Confederation (LDDK).

The organization has invited Economics Minister Viktors Valainis (Greens/Farmers) to attend the meeting of the confederation’s council on Wednesday to hear his explanation of the information about the tax guidelines that has been made public. LDDK members include a number of companies and industries for which the  planned tax changes create not only a significant financial burden, but also a bureaucratic one.

According to the LDDK, since the beginning of 2023, the LDDK and other stakeholders, including representatives of the Economics Ministry, have participated in a workgroup of the Finance Ministry, where various taxes in Latvia and the potential fiscal impact of these tax changes were analyzed. The LDDK and partners, including political parties, clearly outlined the objective of improving Latvia’s competitiveness among the Baltic countries, with the improvement of the labor tax regime as the main drive.

Kaspars Gorkss, Director General of the LDDK, believes that currently “cognitive dissonance has been detected in tax policy planning, as there is contradiction among what is discussed in workgroups, what is included in legislation and what is said in public”.

“It is no coincidence that the European Commission is also concerned about the state of social dialogue in Latvia, which is increasingly dependent on the public sector and does not gather the views and expertise of stakeholders. Decisions are taken by a narrow circle of civil servants, guided by subjective mathematical formulas. We therefore insist that an important function of the economics minister is to bring the employers’ arguments and proposals to the attention of the Finance Ministry, not through a process of political bargaining, but through a clear commitment to our common goals,” says Gorkss.

According to the LDDK, of all the proposals of the social and cooperation partners representing the interests of entrepreneurs and employers, so far only a minimal increase in the employer’s compensation to employees in connection with remote working and a revision of the personal income tax exemption threshold for health insurance premiums have been taken into account. Other proposals by the Finance Ministry have been made without discussion with social partners and cooperation partners, and have already led to several cost increases in a number of sectors, threatening their competitiveness.

The LDDK calls on the Finance Ministry to immediately resume the social dialogue and work on the tax guidelines, and on government representatives to include in the new government’s action plan concrete, measurable steps to boost the country’s economy and to incorporate them into the priorities for 2024.

As reported, last week the government endorsed a number of tax policy proposals mentioned in the informative report on the progress of the development of the National Tax Policy Guidelines 2024-2027 prepared by the Finance Ministry and expected to be adopted together with the 2024 budget.

Source: BNS

(Reproduction of BNS information in mass media and other websites without written consent of BNS is prohibited.)

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