Latvian Employers’ Confederation (LDDK) reports having invited Minister of Economy Viktors Valainis to a meeting to request from him explanations about the publicly reported information on tax guidelines. The suggested changes risk impacting port-based businesses the most.
Several sectors are at risk of not only becoming unable to compete, but also continue existing in 2024-2026. Among LDDK members are also many businesses and sectors for whom previously uncoordinated and non-employer tax changes had caused not only considerable financial and bureaucratic burden. The organisation hopes to discuss this with the minister on Wednesday, the 4th of October.
It was mentioned in the statement: since the start of 2023 LDDK and other involved sides, the Ministry of Economy included, participated in a meeting of a work group of the Ministry of Finance. During this meeting participants analysed 13 different taxes in Latvia and the potential fiscal influence if those taxes are amended. LDDK and partners, including political parties, have clearly defined the goal – raising Latvia’s competitiveness among Baltic States by making the improvement of the labour force tax regime as the main driving force.
LDDK Director General Kaspars Gorkšs comments: “Currently
there is a cognitive dissonance in tax policy planning,
because what was discussed in work groups, what is included in regulations and what is said in the public space contradict one another. It’s nor surprise as to why the European Commission is concerned about the state of the social dialogue in Latvia, which depends more and more on the involvement of the public sector and does not reflect the opinions of involved sides and experience.”
He continues: “Decisions are made by a small number of officials based on subjectively selected mathematical formulae, choosing variables to make it easier to arrive at the desired imaginary result at specific points. This is why we insist that an important function of the Ministry of Economy is taking arguments and proposals from employers and bringing them to the attention of the Ministry of Finance – not in the process of political bargaining, but by clearly standing up for our common goals.”
LDDK notes that of the proposals that represent businesses’ and employers interests the government has taken into account minimal increase in employer’s compensation to an employee in connection with remote work and a revision of the PIT exemption threshold for health insurance premium amounts.
Other proposals
from the Ministry of Finance went on without discussions with social and cooperation partners.
Because of this, a number of sectors have seen a sharp surge of costs, putting their competitiveness at risk.
For example, Latvian Stevedoring Company Association (LSA), which is a member of LDDK, concluded: on the 26th of September, the tax policy proposals from the Ministry of Finance for 2024-2026 are based on tax increases that will lower economic activity and will lead to notable and existential complications for the port sector.
LSA, which represents Latvian sea port businesses, stresses that there were no consultations with the sector on the planned change and increase of excise tax rates for diesel fuel, fuel oil and petrol used by Special Economic Zones (SEZ) and freeports. When planning the doubling of excise tax rates in 2024 and their increase by 500% in 2026, the government did not take into account the situation in the port sector.
LSA council chairman Ivars Landmanis:
“The increase of excise tax on fuel within SEZs and freeport territories undermines the principle of legitimate expectations and draws a line on all investors’ estimates of value for money invested. This “change of game rules” before the 31st of December 2035, when it is planned to change the status of SEZs, is a clear sign to investors
that Latvia is an unsafe and unpredictable country for business.
The practically five-fold increase of excise tax rates for businesses based in SEZs and freeport territories clearly contradicts the very concept of special economic zones, which is originally intended to prevent the worsening of legal status of commercial organisations because of law amendments. This is why it is very likely businesses will be forced to turn to the Constitutional Court or even the European Court of Law.”
LDDK invites the Ministry of Finance to immediately restart the social dialogue and work on tax guidelines, as well as have government representatives include in the action plan concrete, measurable measures to promote the national economy and include them into priorities for 2024. LDDK also stresses the role of the Ministry of Economy in maintaining and promoting mutual dialogue and cooperation, which can help lead to tangible and measurable results in order to introduce a Latvian economic growth-enhancing tax policy.
Also read: Latvian government approves massive tax changes for next year