Minimum wage, excise tax on fuel to be discussed after tax policy guidelines are endorsed
The government is planning to pass the main tax policy principles on May 3, but discussions about a number of specific issues - the minimum wage, excise tax on diesel fuel and total budget deficit - will continue, Prime Minister Maris Kucinskis (Greens/farmers) told reporters after a meeting with the Bank of Latvia Governor Ilmars Rimsevics has said.
Two months have passed since the Bank of Latvia presented its tax policy strategy that largely served as the basis of the Finance Ministry’s tax reform, said Rimsevics. However, many things have changed since that time.
The Bank of Latvia has concluded that, if there is no certainty about the maximum budget deficit, it would not be right to mix up the tax strategy with specific budget figures for 2018. The central bank recommended the prime minister to go ahead with the real tax policy principles concerning changes to personal income tax, corporate tax, exempting reinvested profit from taxes and others. The other proposals should be dealt with after the maximum budget deficit level becomes clear at the end of May, said Rimsevics.
The Bank of Latvia recommends the government to temporarily put off discussions about proposals that concern social security, nontaxable minimum income, lack of funds in healthcare, and others.
On the other hand, Kucinskis said that he and Rimsevics had agreed that the main tax policy principles would be reviewed and passed by the government on Wednesday. He confirmed that some matters would be taken out of the tax policy and discussed later. “Some of the issues will only be finalized after we harmonize them with the European Commission and know the permissible budget deficit level,” said Kucinskis.
He explained that the government must not hurry with decisions that may be overturned by the European Commission. If that happens, the government will have to consider other options that have not yet been discussed, for instance, increasing value added tax. “Raising VAT is not on the agenda at the moment, and I hope that we will not have to discuss it,” said the premier.
“We have to know what budget deficit we can afford. According to the current proposal, it could be 170 million Euros, but we have to be absolutely certain that we can afford it,” explained Kucinskis. Also discussed will be raising the excise tax on fuel, and the effect of the tax reform on direct payments to farmers.
Discussions about the minimum wage will also continue after the government knows the budget deficit for 2018. “I very much hope that we will not have to go back on what has been promised, but that will only be clear after Saima endorses the entire tax policy,” added Kucinskis.
And yet, the tax reform will be “in the interests of the common man” as the government is not planning to revise its decisions regarding the personal income tax rate and non-taxable minimum income, Kucinskis emphasized.