Reira’s tax increase and opposition strangulation plan

It is planned to obtain money mainly from the redistribution of personal income tax (PIT), which would significantly reduce local government revenues. Taxes would also increase for those working in various non-standard regimes. It is planned to introduce tax changes in three stages – in the period from 2021 to 2023. FM has decided to eliminate such a phenomenon as royalties. It is planned to increase the excise duty and change everything else in the name of bright and sustainable development.

Now there should be stormy applause, which turns into uncontrollable applause. The government has “found” 180.8 million for medicine, and all patients will now recover. However, getting up and joining the general passionate ecstasy is hampered by some misunderstood questions.

“There is now more money than ever before,” Prime Minister Krišjānis Kariņš (New Unity) defined at the beginning of the Kovid crisis. But it turns out that is not all. All the big four billion borrowed or available to the government as a line of credit will not be given to the economically disadvantaged people of the covid crisis, but will be poured into reinforcement in concrete buildings – in the concert hall, prison, sports arena. So that big money is not the money that health needs.

The money in the health wallet will fall, but it will not fall from the air. You will have to take it from some wallet. The main wallet is marked – they are municipalities. So, on the one hand, the Minister of Justice Jānis Bordāns (New Conservative Party) and his ministry lurk in the wallets of municipalities with quick ideas about not collecting real estate tax from owners whose property is worth less than 100,000 euros. If this plan were to be implemented and a fundamentally different system was not devised to compensate local governments for losses from uncollected RET, local governments would be left without a significant source of money.

On the other hand, Jānis Reira (New Unity) comes to the Ministry of Finance and pays for another municipal money – personal income tax (PIT). Municipalities have been moaning for years that the redistribution of this tax could be more friendly to municipalities. Well, now the Ministry of Finance intends to redistribute this even more harshly – the skin and meat of the PIT will be for the government, but the nails, horns and viscera will remain with the municipalities.

It is not enough for the Minister of the Ministry of Environmental Protection and Regional Development Juris Pūce (“For Development / Par!”) To “roll out” the administrative-territorial reform. It seems that the ruling parties of the government are just doing it as they come up with something new to humiliate, oppress and destroy. But this is probably understandable – in many local governments the government parties have no say, there is also envy that among all the institutions the Saeima and the government have a very low rating, but for local governments it is relatively much higher. Probably the idea is to redistribute not only some taxes, but also power in local governments. If local governments are not able to perform their functions in the social, educational, infrastructural fields, they will be able to point a finger at them: “Look, what curses, but we are good!”

What does it mean to “increase taxes for those working in various non-standard regimes”? This means that behind the tax policy development directions proposed by the Ministry of Finance, which are intended for the noble promotion of the sustainability of state social and health insurance, the tax burden would increase for those working with dependents. Kārlis Vilerts, an economist at the Bank of Latvia (LB), did not say this in an interview with the news agency LETA.

He noted that the Ministry of Finance offers a tax haven by increasing the rate of compulsory state social insurance contributions (SSIAI) and at the same time reducing the personal income tax burden, but in this case the tax burden would even increase for those working with dependents.

The Bank of Latvia traditionally sings in unison with the government, but in this case the economist from the Bank of Latvia politely points out that something is not really good with the ideas of the Ministry of Finance. He also played a thesis, which is not new, but the government is not doing anything in this direction. “The tax burden on labor in Latvia is higher than in most European Union member states, including higher than in Lithuania and Estonia. Employee salaries and taxes applied to them are an important component of corporate costs, higher labor taxes make the prices of goods and services produced in Latvia more expensive, thus making Latvian companies less competitive. This is especially true in the context of the global crisis, when people’s spending is falling in almost every corner of the world and competition between companies is intensifying.

Therefore, I believe that now would be the right time to think about reducing labor taxes, ”said the LB economist.

If the government were to take this issue seriously, weighing its steps and assessing the consequences, there might be no fault. However, the tendency is not to operate with a scalpel, but with the butcher’s waist – brutally and so that it dissolves.

Sometimes it seems that maybe the Latvian economy would have to live for some time without a government at all – the state might breathe and recover. Because the current government redistributes the money that is left in the country less and less. And less is left not only due to objective covid reasons, but due to the absurd actions of the ruling parties – at least the number that was played out by discrediting ports, calling sanctions and depriving municipalities of raided ports. The results are immediately visible – for example, the turnover at the port of Riga has fallen by almost a third. And this is no longer the only measure in which the government acts on the Mao principle “the worse the better”. Where are there any taxes and from whom will people be charged if people do not have money for gas, electricity and bread?

The media, book writers and publishers, musicians, actors and dancers, who have already suffered huge losses as a result of Covid-19 and are now in severe financial difficulties, will be deprived of the current royalty regime. This means an increase in the tax burden. The idea is simple and clear – to drive creative people into extreme poverty, to manipulate them and to destroy the disobedient economically. Those who criticize the ruling elite or do not be lenient enough will be able to pay their taxes by crying. Taxes will also be paid by those who sway in praise, but are flattered with money from the Ministry of Culture’s support programs. It looks like Putin and Lukashenko will soon be nervously smoking in the field. Latvian politicians will show how to properly eliminate the opposition.

It would be good if government ministries somehow slow down the horror of the population and business with their sustainable development reform plans, which always means raising taxes. It would have been better to think about how to attract and earn money for the state than to rob the population and entrepreneurs.

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