RIGA – Prime Minister Valdis Dombrovskis has said that the 2011 may not need such drastic spending cuts as first envisioned thanks to growing tax revenues.

Speaking on public radio Wednesday, the prime minister said while the exact number is still unclear, the budget consolidation — or expenditure cuts plus revenue increases — might comprise only 250 million lats (€350 million) instead of the 500 million lats originally envisaged.

Dombrovskis said that [private_supervisor]the finance ministry has prepared forecasts for economic growth and tax revenues and that the final budget number will depend on that.

He said the deficit would have to be lowered to 6 percent from 8.5 percent this year, in line with the agreement signed with international creditors. Crucially, pensions won’t be cut next year, Dombrovskis said. However, he did not rule out that social benefits could fall under the ax, saying that the welfare ministry was preparing a number of proposals about how to save money in this nondiscretionary segment, which is the single largest item in the budget.

The fact that Latvia is in an election year complicates the passage of the 2011 budget, but by now it is clear that the bill will be passed by the new Parliament, which will appear after the election in early October.

The government is grappling with four different tax scenarios beginning next year — ranging from keeping the status quo to an all-out effort to boost revenues via a regimen of higher taxes, particularly the value-added tax. The decision is part of an effort to provide mid-term transparency as regards taxes, something Latvia has lacked in the past.

Last month Finance Ministry State Secretary Mārtiņš Bičevskis said that the overall tax burden would not increase as a result of the decision on mid-term tax policy. He stressed that, compared with Western Europe, the overall tax burden in Latvia is low.

Latvia is targeting a 3 percent deficit in 2012 in order to join the eurozone by 2014.

The next European Union-International Monetary Fund mission is expected to begin its review of Latvia’s 2010 budget performance on May 25. [/private_supervisor] [private_subscription 1 month]the finance ministry has prepared forecasts for economic growth and tax revenues and that the final budget number will depend on that.

He said the deficit would have to be lowered to 6 percent from 8.5 percent this year, in line with the agreement signed with international creditors. Crucially, pensions won’t be cut next year, Dombrovskis said. However, he did not rule out that social benefits could fall under the ax, saying that the welfare ministry was preparing a number of proposals about how to save money in this nondiscretionary segment, which is the single largest item in the budget.

The fact that Latvia is in an election year complicates the passage of the 2011 budget, but by now it is clear that the bill will be passed by the new Parliament, which will appear after the election in early October.

The government is grappling with four different tax scenarios beginning next year — ranging from keeping the status quo to an all-out effort to boost revenues via a regimen of higher taxes, particularly the value-added tax. The decision is part of an effort to provide mid-term transparency as regards taxes, something Latvia has lacked in the past.

Last month Finance Ministry State Secretary Mārtiņš Bičevskis said that the overall tax burden would not increase as a result of the decision on mid-term tax policy. He stressed that, compared with Western Europe, the overall tax burden in Latvia is low.

Latvia is targeting a 3 percent deficit in 2012 in order to join the eurozone by 2014.

The next European Union-International Monetary Fund mission is expected to begin its review of Latvia’s 2010 budget performance on May 25. [/private_subscription 1 month] [private_subscription 4 months]the finance ministry has prepared forecasts for economic growth and tax revenues and that the final budget number will depend on that.

He said the deficit would have to be lowered to 6 percent from 8.5 percent this year, in line with the agreement signed with international creditors. Crucially, pensions won’t be cut next year, Dombrovskis said. However, he did not rule out that social benefits could fall under the ax, saying that the welfare ministry was preparing a number of proposals about how to save money in this nondiscretionary segment, which is the single largest item in the budget.

The fact that Latvia is in an election year complicates the passage of the 2011 budget, but by now it is clear that the bill will be passed by the new Parliament, which will appear after the election in early October.

The government is grappling with four different tax scenarios beginning next year — ranging from keeping the status quo to an all-out effort to boost revenues via a regimen of higher taxes, particularly the value-added tax. The decision is part of an effort to provide mid-term transparency as regards taxes, something Latvia has lacked in the past.

Last month Finance Ministry State Secretary Mārtiņš Bičevskis said that the overall tax burden would not increase as a result of the decision on mid-term tax policy. He stressed that, compared with Western Europe, the overall tax burden in Latvia is low.

Latvia is targeting a 3 percent deficit in 2012 in order to join the eurozone by 2014.

The next European Union-International Monetary Fund mission is expected to begin its review of Latvia’s 2010 budget performance on May 25. [/private_subscription 4 months] [private_subscription 1 year]the finance ministry has prepared forecasts for economic growth and tax revenues and that the final budget number will depend on that.

He said the deficit would have to be lowered to 6 percent from 8.5 percent this year, in line with the agreement signed with international creditors. Crucially, pensions won’t be cut next year, Dombrovskis said. However, he did not rule out that social benefits could fall under the ax, saying that the welfare ministry was preparing a number of proposals about how to save money in this nondiscretionary segment, which is the single largest item in the budget.

The fact that Latvia is in an election year complicates the passage of the 2011 budget, but by now it is clear that the bill will be passed by the new Parliament, which will appear after the election in early October.

The government is grappling with four different tax scenarios beginning next year — ranging from keeping the status quo to an all-out effort to boost revenues via a regimen of higher taxes, particularly the value-added tax. The decision is part of an effort to provide mid-term transparency as regards taxes, something Latvia has lacked in the past.

Last month Finance Ministry State Secretary Mārtiņš Bičevskis said that the overall tax burden would not increase as a result of the decision on mid-term tax policy. He stressed that, compared with Western Europe, the overall tax burden in Latvia is low.

Latvia is targeting a 3 percent deficit in 2012 in order to join the eurozone by 2014.

The next European Union-International Monetary Fund mission is expected to begin its review of Latvia’s 2010 budget performance on May 25. [/private_subscription 1 year]

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