The government plans to review the report at Thursday’s meeting.
On Monday, Prime Minister Evika Siliņa (JV) admitted to journalists that until this meeting, certain “issues left on the table” are still to be discussed.
So, for example, in a short time, politicians have changed their minds about the allowance for working parents. On Tuesday evening, the Minister of Welfare Uldis Augulis (ZZS) announced that it is expected to be increased to 60% (currently 50%) of the amount of the granted parental allowance, instead of 75%, as was announced earlier. “This is what is currently possible in the budget,” he said, adding that this alone will cost three million euros in the budget. However, the FM informed on Wednesday afternoon that it was possible to maintain the original plan – 75%.
An agreement was also reached to raise the non-taxable minimum for pensioners from 500 to 1,000 euros per month next year, although initially there was an agreement on an increase to 750 euros.
The report was prepared according to the tax revision scenario conceptually supported by the National Council for Tripartite Cooperation. The proposal for labor tax changes envisages an increase in the net income of approximately 95% of employees, or all those whose gross salary is up to 4,000 euros per month, with the largest increase directly for employees with a salary of up to 2,500 euros, according to the FM.
The ministry explains that the proposed scenario simplifies the tax system and, together with the reduction of labor taxes, would promote private consumption and investments. At the same time, the changes developed would equalize Latvia’s labor cost competitiveness at the Baltic level, and leave additional funding for companies for further investments and promote economic growth.
From 2025, it is planned to set the fixed non-taxable minimum for all wages in the amount of 510 euros per month, and from 2026 it will be increased to 550 euros and in 2027 to 570 euros per month. The non-taxable minimum for pensioners is expected to be increased from 500 to 1,000 euros per month next year. The minimum wage in 2025 will increase from 700 to 740 euros per month, in 2026 to 780 euros per month, from 2027 to 820 euros per month, and from 2028 to 860 euros per month.
For example, if a person receives a pension of 750 euros per month, his benefit will be an additional 50 euros per month in the following year. On the other hand, if the pension is 1,000 euros, then from 2025 the person “on hand” will receive 100 euros more per month.
Balancing the non-taxable minimum with personal income tax (PIT) rates and in order to simplify the labor tax system, it is planned to set a single personal income tax (PIT) rate of 25.5% for incomes up to 105,300 euros per year (8,775 euros per month). For incomes above 8,775 euros per month, the solidarity tax of 33% is maintained. Since the amount of the non-taxable minimum will remain unchanged regardless of the amount of salary, citizens will have more money “on hand”, despite the fact that the VAT rate would change from 20% and 23% currently to 25.5%.
In order to compensate for the decrease in budget revenues caused by changes in labor taxes, it is planned to transfer one percentage point from the funded pension scheme (second level) to the first level of pensions, allocating 15% to the first level and 5% to the second level, respectively. The solution is scheduled for the period from January 1, 2025 to December 31, 2028.
In order to achieve the climate neutrality goals of the European Union, it is planned to gradually increase the excise tax rates for fuel, as well as for fuel, natural gas and petroleum gases used as fuel, for the CO2 component. In 2025, the rate will be 10 euros per ton of CO2 and in 2026, 20 euros per ton of CO2.
Also, from 2025, it is planned to increase the excise tax rate for soft drinks with a sugar content of up to eight grams per 100 milliliters from 7.4 euros per 100 liters to 11 euros per 100 liters. As a result, the share of taxes per liter of drink would increase by four cents, FM explains.
From 2027, in order to harmonize excise tax rates with the Baltic States, it is planned to increase the excise tax rate for alcoholic beverages, including beer, tobacco products and products similar in purpose of use, such as heated tobacco, tobacco leaves, e-liquid and tobacco substitute products.
As a result, according to FM calculations, the price of a 0.5-liter bottle of strong alcoholic drink (alcohol content 40 percent by volume) could increase by 0.15 cents in 2027, bottles of wine (0.75 liters) – by six cents, while 0.5-liter beer bottles (alcohol content 5.2% by volume) – for two cents.
The tax portion (minimum level of excise tax and the portion of the value added tax applicable to it) will increase by 46 cents for a pack of cigarettes in 2027, for a pack of heated tobacco (5.3 grams) – by 19 cents. The price of a 40-gram pack of smoking tobacco could increase by 62 cents, and the price of one pack of cigars or cigarillos (10 pieces) – by 29 cents.
On the other hand, the tax level for electronic cigarette refill liquids will increase by 10 cents for a two-milliliter package, and by 48 cents for a 10-milliliter package. The share of taxes on tobacco substitute products (for example, nicotine pads, 14 gram packaging) will increase by 28 cents in 2027.
The proposal includes a plan to remove the excise tax exemption for petroleum products used in electricity production and cogeneration, setting the excise tax rate as that of petroleum products used as fuel.
Amendments to the Vehicle Operating Tax and Company Light Vehicle Tax Law are also planned, providing for an average increase of all vehicle operating tax rates by 10% starting from 2025, setting the vehicle operating tax payment deadline – January 31 of the year following the calendar year, and increasing the company light vehicle tax rates on average by 10%, starting from 2027.
Starting from 2025, it is planned to increase the lottery tax rate to 15% and increase the gambling fee for the re-registration of the license to organize gambling to 45,000 euros for each current year. On the other hand, starting from 2027, the Lotteries and Gambling Law provides for a series of other changes, including raising the gambling tax rate for games of chance by phone and totalizator and betting to 18% and raising the gambling tax rate for bingo to 12%.
It is also planned to expand the tax relief for collective agreements (for mobility) up to 700 euros per year.
On the other hand, royalties recipients are expected to continue the tax payment procedure established until now for another three years.
The proposal envisages applying a value added tax (VAT) rate of 12% to fresh fruits, berries and vegetables characteristic of Latvia. Support amounts (subsidies) received by farmers will not be subject to VAT.
The necessary changes are expected to be made in the package of bills accompanying the bill “On the state budget for 2025 and the budget framework for 2025, 2026 and 2027”.
According to the calculations of the FM, the planned changes in labor taxes in 2025 will create a deficit in the budget in the amount of 87.1 million euros.
The changes in the TIN in the budget will create a deficit of 191.1 million euros, the increase of the pensioner’s non-taxable minimum – a deficit of 119.3 million euros, the increase of the non-taxable minimum – a deficit of 449.9 euros. On the other hand, changes in VAT rates and income thresholds in the budget will bring 352.9 million euros of additional income, while the return effect of VAT will bring an additional 25.2 million euros to the budget.
The transfer of contributions of one percentage point from the funded pension scheme to the first level will bring additional revenues of 14 million euros to the budget.
Applying a VAT rate of 12% to fresh fruits, berries and vegetables will cause a loss of 17.1 million euros to the budget.
On the other hand, the expansion of the IIT relief for collective agreements (for mobility) to 700 euros per year will cause a loss of 14 million euros to the budget.
The FM informs that compensatory measures will bring 103 million euros of additional income to the budget.
The increase in excise duty rates will allow an additional 33 million euros to be collected, revenues from the sale of confiscated criminally obtained funds are planned to be 30 million euros, the increase in tax revenues in connection with the increase in the minimum wage is calculated to be 18.4 million euros, the transition to the 25.5% basic VAT rate will allow additional collect 17 million euros, raising the minimum wage will allow collecting 17.1 million euros.
The increase in the excise tax rate for sweetened soft drinks will allow an additional collection of 3.3 million euros, the indexation of the car operating tax for all vehicles and changes in the payment term of this tax will allow the collection of 11.4 million euros, while the increase in the lottery tax rate will allow an additional collection of 2.5 million euros.
2024-09-21 02:54:22