No new taxes or tax rates are currently planned, Prime Minister Evika Siliņa (New Unity) stated in an interview on TV3’s “900 seconds” morning program.
“We are doing this deliberately,” Siliņa emphasized when commenting on tax issues, though she acknowledged that discussions on the topic occasionally resurface.
The Prime Minister stressed that the government’s current goal is to stimulate Latvia’s economy, outpace others through savings and smart use of EU funds, and prevent economic stagnation.
She noted that one of the government’s key objectives has been reducing bureaucracy in the banking sector and boosting lending, as this promotes economic growth.
Siliņa reminded that a solidarity tax on banks was introduced last year, which they can avoid if they reach a certain turnover and lending threshold. She expressed satisfaction that lending volumes have increased.
“We can’t bring more money into the Latvian economy just by raising taxes.
What’s important is to increase the overall volume of funding in the economy,” said the Prime Minister.
She also pointed out that while searching for budget savings, there are untouchable groups, including mothers. The government, she said, does not intend to worsen access to services for citizens.
As reported, the government has decided to establish a Defense and Security Fund to increase national defense and security spending.
According to the decision, starting in 2026, Latvia plans to move toward spending 5% of GDP on defense and security, NATO capability goals, and military support for Ukraine.
To finance these additional expenses, potential sources identified by the government include an increase in the general government budget deficit from 2025 to 2028 under the national exemption clause. From 2029, the deficit may be raised by 0.5% of GDP by lowering the minimum planned structural balance set in the Fiscal Discipline Law.
The government also expects state-owned enterprises to review their revenue plans for the next three years and submit proposals to the State Chancellery by June 2, 2025, on how to increase income, following prior coordination with their shareholders.
Public-private partnership (PPP) financing for Ministry of Defense (MoD) investments is also considered a possible source. The MoD, in cooperation with the Ministry of Finance, is expected to prepare a prioritized list of potential PPP projects by July.
Starting from 2029, additional financial resources will also be sought through increased efficiency in the public sector – including policy changes, structural reforms, expenditure reviews, and reductions in spending across general government institutions. The use of EU funds for defense and security needs is supported in principle.
To reduce gross national debt, the government plans to offer at least 10% minority stakes in state-owned companies through public offerings by 2029, including in those currently protected from privatization under existing regulations.
After the government meeting, Prime Minister Siliņa stressed to journalists that the Ministry of Finance will begin talks with other ministries on how to find the extra funds necessary to reach the 5% of GDP defense target.
She noted that funds saved by reducing bureaucracy could also be redirected not only to defense, but also to other government priorities such as education and family support.
“We’ll first review current expenditures in ministries and might consider increasing the [budget] deficit. If that’s still not enough to reach 5%, we’ll look for ways to raise revenues,” Siliņa said. Therefore, the government’s decision includes proposals that would also allow state-owned enterprises to increase their income.
At the same time, the Prime Minister emphasized that the state budget preparation process has not yet begun, so specific decisions will be made later.