The volume of collected taxes in Latvia is insufficient to afford all of the outlined budget needs. This is why when working on the Tax Policy guidelines for 2024-2027, there will be discussions about all 14 active taxes, as Minister of Finance Arvils Ašeradens told journalists on Wednesday, the 29th of March.
The minister explained there will be a review of all existing taxes. Offers from political and social partners will be considered as well. Ašeradens explained that coalition and social partners put an emphasis on labour taxes. New Unity plans to propose a sustainable healthcare funding model in upcoming discussions.
Currently Ašeradens does not predict how discussions might end. At the same time, he said
discussions about labour taxes will be the most difficult.
There could also be changes added to the corporate income tax. The government will also discuss the social security tax and the topic of residents’ income declaration.
The minister reported that after the tax reform of 2018 the percentage of corporate income tax in tax revenue has been 2.7%. In Estonia this tax revenue is around 10%. Ašeradens said that such a small contribution from businesses cannot continue for long.
He also said the tax revenue in Latvia accounts for 30.8% of GDP (33.8% in Estonia).
If Latvia collected taxes at Estonia’s level, the budget would receive at least EUR 1.43 billion in additional funds.
«We have been stuck at approximately 30% level for a long time, and this is not enough to afford all needs. We won’t get anywhere with such a tax burden,» said Ašeradens.
Previously the minister told LETA that immediately after completing work on the state budget for 2023 the government announced plans to start working on the tax policy guidelines. Parties forming the government are in agreement that tax guidelines are reviewed once every political cycle. Generally one or two taxes are changed. The changes are then announced to entrepreneurs. The biggest tax changes may come around 2025.
The Tax Policy Coordination Group has been composed. Its objective is working with the government’s social and cooperation partners to prepare Tax Policy Guidelines for 2024-2027.
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