The gradual reduction of the Personal Income Tax (PIT) is the final step toward economic growth, creation of new jobs and increase of salaries in Latvia. Refusal to reduce PIT could lead Latvia’s economy into stagnation, Chairman of Reform Party’s Saeima faction Edmunds Demiters believes.

Edmunds Demiters

“In the midst of the pre-election campaign there is an attempts to introduce populist solutions to social problems – it is proposed to increase the tax-free minimum at the expense of taxpayer money, presenting this as a solution to the unemployment and poverty problems”, – he says.

RP had previously expressed its support for pension indexation, increase of salaries for police officers, teachers and other state servants. The party had also expressed support to other initiatives that could be realized by reducing PIT. However, according to the party, the political power is strictly against short-sighted solutions at the expense of workforce tax.

“Beneficial, transparent and economic development directed workforce tax policy would improve residents’ trust in the country. It would be an important step toward combating shadow economy”, – Demiters emphasizes.

BNN had previously reported that shadow economy formed 21.1% of Latvia’s GDP last year, while that of Estonia and Lithuania was 19.2% and 18.2% of GDP respectively. The bulk of Latvia’s shadow economy is formed of envelope salaries (42.9%), according to SSE Riga Shadow Economy Index.

The ruling coalition has approved its preparedness to gradually relieve the workforce tax burden, so that it would reduce to 20% by 2015. The attempts of partners to walk away from the promises make it questionable to believe in legal and economic priorities in the coalition as a whole, the party says.

It should be added that the Chairman of the Latvian Chamber of Commerce and Industry Janis Endzins is also confused as to why specific ministers often say things to the media that clearly contradict the previously signed government documents. He believes any diversion from the promise would be unacceptable.

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