Latvia's Economic and Financial Outlook
Pro-growth Tax Reform in Line with Balanced Budget Mandate
Key goals: improve competitiveness, promote exports, reduce inequality and raise revenue to one-third of GDP.
Strategy framework
• Tax structures and rates review
Main changes
Improving tax administration
Non-taxable minimum - EUR 250
Differenced depending on income level from EUR 0/month to EUR 250 per month (2020)
The fight against the shadow economy
Principles
Predictability and a long-term vision
Regional competitiveness, at least in the Baltic region
• Tax motivation for improvement
.
A similar tax burden on similar types of revenue
• Lending and capitalization improvement
Allowance for dependents
EUR 250 per month (2020)
Minimum salary
from EUR 380 to EUR 430
Social contribution
increase by 1% directed to health care
•
Reducing the cost of tax administration
•
Positive impact on economy
Raise disposable income of employees and induce private consumption
More competitive entrepreneurs on regional and global scene as well as
stimulation of own investment
Better capitalized businesses, more opportunities to raise additional funds for
development
Increased prospects to raise production capacity of goods and services, more
effective and efficient production process
More equality between different income groups and types of income
Higher tax revenue resulting from increased economic activity and less tax
avoidance
Source: Ministry of Finance
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Reform of Solidarity tax
PIT rate smoothing
Progressive Personal Income Tax
Decrease from 23% to 20% for year's salary up to EUR 20,004, 23% for EUR 20,004 -
62,800, 31,4% for above EUR 62,800
Corporate Income Tax
20% on distributed profit; no CIT is payable on undistributed profitsView entire presentation