The war in Ukraine and anti-Russian and anti-Belarusian sanctions significantly influence Latvian sea ports. Right now they are in dire need of some additional support from the Latvian state. Unfortunately, what is happening now is directly the opposite – without any consultations with the Ministry of Transport and transport-related organisations, the Ministry of Finance has decided to unreasonably increase the costs of sea ports, the Latvian Stevedoring Company Association (LSA), which unites more than 90% of Latvian sea port terminals, comments the situation.
“This indicates that the Ministry of Finance has no knowledge of this sector and its costs. For example, currently the law states that the excise duty for diesel fuel at sea ports is to be fixed at a certain level until 2035. Sea ports and major foreign investors that help our sea ports develop have to deal with it. If the government does make this absurd decision and sea port operations become more expensive, it will primarily hurt Latvia’s economy, Latvian producers, as well as impact the trust of our foreign investors. We will likely see lawsuits, because long-term investors counted on the stability of Latvian legislation, namely, that tax benefits for fuel would be in force until 2035,” LSA comments.
LSA stresses that before committing their money, investors very carefully study all factions, including taxes for freeports and special economic zones.
“If there are no tax reliefs, we will have denied ourselves an important tool to get investors to invest in Latvia, not Lithuania or Estonia.”
The association also notes that it cannot tolerate such unprofessional undermining of the industry and will decide on further actions to defend those working in the industry in the coming days. “First of all – raising the excise duty goes against the government’s long-term decision to ease up conditions for freeports and special economic zones to attract foreign investors and assist with the sector’s development. Secondly – there have been no discussions with sea port representatives about the actual situation and the ways sea ports can assist the country’s economy.”
LSA believes one of the solutions would be holding consultations with the European Commission, considering the Ministry of Finance previously did coordinate the use of a reduced excise duty at Latvia’s strategically important sea ports until 2035.
In the current geopolitical situation, when the sector already faces an enormous crisis and needs to compete with Klaipeda and Tallinn sea ports for every ton of freight, such a decision indicates complete incompetence, lack of understanding of the situation or – potentially – intentional sabotage of this sector, LSA continues.
According to experts, the Ministry of Finance sees only what it’s political conductors want to see.
This is why their estimates differ greatly from the actual situation and cannot be used to justify such damaging changes. “Neither Minister of Finance Arvils Ašeradens, nor the ministry’s officials thought it necessary to take into account LSA’s argument and estimates of the situation. The Ministry of Finance is not interested in how many port companies will be forced to cease operations in free zones and how many port workers will lose their jobs as a result of this absurd and economically damaging decision. The ministry is also uninterested how amendment to the Law on Excise Duties were rejected by the Saeima Economic, Agricultural, Environmental and Regional Policy Committee despite inconsistencies with calculations and counter-arguments from LSA”.
Experts say that it seems that responsible institutions have forgotten that the fundamental goal is to build prosperity, a safe and stable country, not focus on one-sided income growth and ignore industry representatives when say it is necessary to cooperate and find an acceptable solution for both parties.
LSA and Latvian Employers’ Confederation have made it clear multiple times they want to work together with the Ministry of Finance and work on the development of the sector and increase of the state budget’s revenue. Unfortunately, the Ministry of Finance still believes it knows more about the sector than the ones who work there.
LSA notes that sea ports are not the only ones to be impacted by the approved budget plan.
The agriculture sector, food producers and exporters are just as shocked with it. “The unwillingness of policy-makers to talk to residents and businessmen has led to the state drowning, not developing. The government has forgotten that ministers, officials, or even Saeima deputies don’t manufacture anything. Only the sectors that were managed by New Unity’s government with unreasonable and poorly-developed decisions into a slow death manufacture products and generate added value. In a long-term perspective this “scorched earth” tactic could lead only to a drop in tax payments, but the political power whose leader can afford to spend taxpayers’ money on private flights is indifferent to such an outcome.”
Experts stress that communication and discussion – these are the key words for a balanced and efficient state budget. In a time when sea ports are in dire need of aid, they make it clear they are prepared to cooperate with the Ministry of Finance to find a common solution to ensure sustainable development and stability for Latvia’s national economy, as well as as boost tax revenue for the country without compromising the ability of companies to operate and respecting cooperation with long-term investors. “But the Ministry of Finance doesn’t hear any of that and operates separately from the sector. The ministry uses its own data, which is far from the real situation. The story about sea ports and exporting companies could, in the near future, start in the minds of people with the words: “Once upon a time…”. Sea ports can be easily destroyed using one or several unreasonable decisions. Restoring them, however, will be very difficult, perhaps even impossible.”
According to LSA, the “security and longevity budget” of Evika Siliņa’s government risks becoming a budget of destruction and stagnation for several sectors.
The association reminds that the government in Latvia continues discussions concerning the state budget for 2024, and the budget includes the legislative drafts from the Ministry of Finance that provide for increasing the excise duty for diesel fuel used by sea ports by 500% in the next three years.
Sea ports are one of the foundations of Latvia’s national economy – they provide not only transit through Latvia but also allow exports of Latvian goods and imports of important goods from other countries, as well as assist with transportation of military goods for Latvia’s security.
“But sea ports are also a type of infrastructure that is expensive to maintain, and the state is not giving them a cent – sea ports are maintained, developed and improved by sea port terminals in cooperation with foreign partners. This is why, at the very least, Latvian government provided excise duty discounts for diesel fuel used only by sea port machines. It is because of this Latvian sea ports have many foreign investors that invest into the blood circulation of Latvia’s national economy. This way, operations and workforce of sea ports develop, and as a result, the ports, their terminals and production companies operating within their territories pay about EUR 80 million in taxes to the Latvian budget every year.”