Saeima Upholds in 1st Reading Proposals for Tax Reduction ...

By admin at 23 May, 2012, 10:33 am

Saeima upheld in the first reading the legislative amendments providing for reduction of the standard value-added tax (VAT) rate to 21% from July 1 this year and gradual lowering of personal income tax from January 1, 2013, till 2015. The 100-member Latvian parliament upheld the bill about lowering personal income tax with 94 votes for and the bill about VAT reduction with 93 votes for.

The lawmakers also supported the proposal to treat the bill as urgent, which means that there will be only two readings in the parliament instead of three under the regular procedure.

The standard VAT rate in Latvia at the moment is 22% as opposed to 21% in Lithuania and 20% in Estonia. The purpose of the bill is to reduce the VAT rate in Latvia to bring it closer to the tax rates charged in the neighbouring countries in order to boost Latvia?s regional competitiveness and offset the inflationary pressure created by global price hikes. Also, reducing the tax burden might reduce the impact of inflation, encourage consumption and have positive effects on business growth, the Finance Ministry said.

Personal income tax is to be lowered from current 25% to 24% in 2013, to 22% in 2014 and to 20% in 2015.

The Finance Ministry said that the purpose of the labour tax reforms was to ensure for Latvia labour taxes that cost-wise would put in on equal footing with the neighbouring Baltic States in the competition for investments and jobs. ?By reducing the overall labour tax burden, we will also reduce the risks of poverty and structural unemployment, the shadow economy and the motives for tax evasion,? the ministry said.

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