Analysis of trends in the tax burden in Latvia
2013
Jakusonoka, I., Latvia Univ. of Agriculture, Jelgava (Latvia). Faculty of Economics
Latvia's ''Tax Policy Strategy 2011-2014'' was elaborated, taking into account the need to ensure the stability and predictability of its tax policy and to increase the competitiveness of Latvia's national economy as well as Latvia's intension to introduce the euro in 2014. The research aim is to analyse changes in the trends in tax burden in Latvia in 2009-2012 within the common context of the EU tax environment by employing comparative analysis. To achieve the aim, the following research tasks were set: to characterise the changes in the trends in tax burden in Latvia in 2009-2012 and to perform an international comparative analysis; to identify factors promoting and hindering business and social development basing on the analysis of trends in the tax burden performed in the present research. To make statistical data on the EU States comparable, the European system of national and regional accounts 1995 (ESA 95) and the tax classification based on ESA95 were used. The majority of tax revenues in Latvia are composed of labour taxes, although, over the recent years, the proportion of these taxes in the total tax revenue has been reduced from 52% in 2009 to 50.8% in 2011. Labour taxes in Latvia, to a greater extent, reduce the real income level, particularly for population groups with the lowest income. The country's fiscal policy for 2013-2015 is determined by several factors: a course towards a balanced government budget over the economic cycle, observance of the fiscal policy terms set by the Stability and Growth Pact (SGP), and economic growth measures to be implemented in the post-crisis period. The most significant measures affecting tax revenues in the period 2013-2015 will be: a reduction in the personal income tax rate from the present rate of 24% (in 2013) to 22% in 2014 and to 20% in 2015 and a reduction in the tax burden to 26.3% of GDP in 2015. The enhancements in the tax policy have to be oriented towards the improvement of Latvia's demographic situation, systematic and purposeful attraction of foreign investments, and faster transferring of the tax burden from labour to consumption.
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