Latvian government approves massive tax changes for next year

On Tuesday, the 26th of September, Latvia’s government approved multiple tax policy proposals mentioned in the “informative report on the progress of the development of the state tax policy guidelines for 2024-2027” prepared by the Ministry of Finance. These proposals are planned to be passed together with the state budget for 2024.
The work group’s proposals provide for raising the excise tax for alcohol, petrol products, tobacco products, as well as raising the gambling tax.
The work group also suggests simplifying the micro-enterprise tax, as well as performing multiple changes to the personal income tax, value added tax, natural resource tax and the application of the corporate income tax.

Among the suggested changes is the mandatory corporate income tax advance of 20% for banks

from the previous year’s profits.
The work group will continue discussions about various proposals and their “design” – rates, sizes of benefits and administrative topics. This means they may be updated by the time they are submitted to the Cabinet of Ministers.
The report mentions that excise tax is the fourth largest source of tax revenue: in 2022 it accounted for approximately 10% of the total tax revenue or 2.9% of GDP.
Because excise tax is not a necessity, the excise tax increase may not potentially affect low-income residents, the ministry’s report mentions. The primary excise tax good categories up for review are petrol products processed by special economic zones and freeports. There are also alcoholic beverages and tobacco products, as well as liquids for electronic smoking devices and tobacco alternatives.
The report mentions that the increase of excise tax rates for certain groups of excise goods contributes to the achievement of the objective of the guidelines, namely an increase in funding for the provision of sustainable public services and economic development. It is concluded that by adopting excise tax proposals, excise tax revenue in the budget would grow by approximately EUR 22 million to EUR 92 million across the entire mid-term planning period or 0.05% – 0.2% of GDP.
At the meeting of the coordination group for the improvement of tax policy, where the issues of excise tax review were discussed, conceptual support was provided to the gradual increase in excise tax rates in order to ensure that the objectives of excise tax are achieved, while also drawing attention to the fact that the control and monitoring mechanism, border control and the reduction of the grey economy have improved in the movement of excise products.
Also read: Traders association: food product prices in Latvia should go down in September