Immovable property tax in Latvia: problematic aspects and possibilities for improvement
2012
Vitola, I., Latvia Univ. of Agriculture, Jelgava (Latvia). Faculty of Economics | Joma, D., Latvia Univ. of Agriculture, Jelgava (Latvia). Faculty of Economics
In making a tax policy on the present economic conditions in the world, the role of government is still very large – it can both promote and hinder the unlimited development of business, and social stratification and differentiation as well as the development of social sphere. The research aim is to investigate and analyse the nature of immovable property tax and its role in the national economy of Latvia and the mechanism used for tax collection and distribution as well as to provide proposals for the improvement of immovable property tax. Since the best method in researching any phenomenon is the historical method, immovable property tax (hereinafter IPT) is studied and viewed historically by exposing its origination and formation, its advantages and disadvantages as well as measures, according to the authors, necessary for its improvement. The present Law on Immovable Property Tax (1997) is mostly based on an assumption that all sectors of economy are equally profitable and different rates of return promote investment in areas where it brings the highest return, thus, raising a nation’s wealth. The authors’ view, which is based on a long-term analysis of all sectors of the national economy, is that any sector features a specific rate of profitability. Usually, according to a general scheme, the lowest rate belongs to forestry, followed by agriculture, quarrying industry, and manufacturing, whereas the highest rate is observed for commerce, banking and insurance, services, and entertainment and gambling. The authors came to an essential conclusion that IPT rates had to be differentiated by sector depending on the purpose of use of immovable property, since immovable property features different possibilities to ensure income to its owners, besides, capital liquidity is different.
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