RIGA — Latvia’s government agreed Friday to raise a number of taxes in a last-ditch effort to appease international lenders, who demanded additional measures to shore up next year’s budget deficit.
Finance minister Einars Repše told the press that the new revenue-raising measures increase income, vehicle and property taxes, plus a introduce a progressive tax on corporate profit. The tax increases were forced upon the government by lenders such as the International Monetary Fund and the European Union, who, according to reports, had doubts as to whether the measures ministers previously agreed upon were sustainable.
Ministers had to trim the budget by another 50 million lats (€70 million), but since, as many observers have pointed out, there is little left to cut in the budget, they had no alternative but to raises taxes. Specifically, personal income tax was raised from 23 to 26 percent, capital gains tax from 10 to 15 percent, and an increase in corporate profit tax to 25 percent on all profits over 5 million lats (€7 million). By contrast, the first 5 million lats will be taxed at the previous rate of 15 percent. In addition, a new tax on natural gas will also be introduced starting July 1.
Ŗepse said the new taxes would bring in an estimated 57.4 million lats (€81 million). The largest gains will come from the higher income tax of 31.8 million lats (€44 million) and the vehicle tax 15 million lats (€21 million). The tax increases were met with scorn, though at this juncture Latvians are inured to the bad economic news and dire forecasts.
On Friday the statistics bureau reported that 18.4 percent of working-age Latvians were seeking jobs, and worse, 34 percent of the population subsisted on 200 lats (€280 euros) per month. Eurostat, the EU’s official statistics agency, reported earlier this month that Latvia now has the highest level of unemployment in the 27-member EU.
The new tax hikes also materialized as Latvia’s Parliament reviews next year’s budget. Lawmakers approved the bill in a first reading earlier this month and are likely to pass it in a second and final reading in early December. However, without the difficult consolidation, Latvia threatened to lose what little trust was left with international lenders, without whom the Baltic state would likely go bankrupt.
Many corporations will be registered out of Latvia. And thinki about that level of income how ordinary Latvians are living. Maybe tax for breathing air coud be good idea, because it it more or less difficult to avoid. I am very sorry, but difficult to see this govrnment will be longlasting. We are living on the edge now. Cannot face much more suffering and cuttings.
The truly scary thing is that Skele, Slesers, Lembergs et all are lining up to try and grab power as if they had nothing to do with the situation Latvia finds itself in. With them in charge (please God no!) Latvia would be right back where it started: “pedal to the metal” but heading straight towards a brick wall.