The twin cities of Valka and Valga, separated by the Latvian-Estonian border, have long been a place where residents of both countries use the services of the other; Latvian officials have announced that tax income from Latvian citizens who have registered in Estonia is being lost and have called for an agreement on compensation mechanisms, writes ERR News.
Valka is facing financial difficulties, and this is mainly due to the fact that the city’s residents have registered as residents in Valga, and thus Latvia does not receive tax income from them. Latvian Finance Minister Arvils Ašeradens told the program Aktuaalne kaamera that the two countries should agree on how to compensate for services that both Latvians and Estonians use in neighboring cities.
About 1,000 Latvians have registered their residence in Valga, which means that these people do not appear in any way in the Valka population register, and taxes are also paid in the neighboring country. At the same time, families of Latvians registered in Estonia continue to use various services on the Latvian side, and some of them actually still live in Latvia, but it is impossible to prove this.
The chairman of the Valka municipality, Vents Armands Krauklis, said that the families are in Latvia, the children attend Latvian schools, but income tax is paid in Estonia. “Which is naturally good for you. Meanwhile, we have a budget shortfall because we receive nothing from those people. They’re not reflected in our budget planning and we cannot apply for tax funds,” said Krauklis.
The children of some Valka residents attend school and kindergarten in Valga,
but this is a minority.
The head of the Valga municipality, Monika Rogenbaum, said that there is no real cross-border accounting, and the only agreement concerns an art school, which the Latvian side pays for the Estonian children attending. She added that this is not a mass phenomenon, but such situations do arise in twin cities.
The Valga administration believes that the Latvian state should compensate the municipality for the lost income. However, it is impossible to calculate exactly how much this is. Krauklis pointed out that the municipality has been trying to explain to the government for ten years that people who live in Valka but have registered their residence in Estonia should be taken into account when planning the state budget. If this had been done, the Valka municipality would not currently have financial problems. Krauklis said: “This is not a criticism of the Estonians — wages are higher in Estonia, the economy is stronger and that’s just how it is. Nor is it a criticism of the people involved. In a twin town like this, it’s natural for people to use both sides’ schools and infrastructure.”
True, the lost income is only part of Valka’s financial problems. It owes the state taxes, and also owes about 15,000 euros for heating services, mainly to the Estonian company Utilitas.
Ašeradens said that it is clear that each country has its own laws, but that there are countries that have found smarter solutions for such border towns: “I believe both sides should sit down and work out a different economic model than what we have now.”
So far, the talks between Latvia and Estonia have not touched on mutual compensation mechanisms.
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