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On Thursday, 7 November, the Saeima adopted in the final reading the Law on the State Budget for 2014, the Law on Medium-Term Budget Framework for 2014–2016 and amendments to 37 budget-related laws.
One of the top priorities of the state budget for 2014 is to narrow the income gap by lowering taxes for citizens with low income and families with children, as well as to fight against the shadow economy. The improvement of the demographic situation by increasing child-care and parent’s benefits is also amongst next year’s priorities.
Next year, the social insurance contribution rate will be set at 10.5%, the non-taxable minimum of the personal income tax will be raised to EUR 75 (LVL 52.71) and the tax relief to guardians will be EUR 165 (LVL 115.96).
Payments made from the Maintenance Guarantee Fund for a child up to 7 years of age will be EUR 71.14 (LVL 50) and for a child between 7 and 18 years of age – EUR 78.26 (LVL 55).
The minimum salary will be increased to EUR 320 (LVL 225), while the personal income tax rate will remain at 24%.
As of next year, salaries of the lowest-paid public sector workers such as medical doctors, teachers, and people employed in the justice and interior sector, as well as social and cultural workers, will be raised.
From now on, bonuses will be added in calculating employees’ average salary because, in essence, they are remuneration for commendable work. The same rule will apply to payments made to medical doctors who work from home and are called to the hospital on demand.
As of 1 April 2014, the Latvian electricity market will be opened, thus enabling more than 840,000 households, which account for around 25% of energy consumption, to choose an electricity supplier.
The Saeima introduced several significant changes with regard to taxes. A tax will be imposed on improperly maintained cultural monuments protected by the state and buildings whose construction is not completed on schedule; the excise tax on natural gas for vehicles (liquefied oil gas) and the natural resources tax on packaging, old and end-of-life vehicles will be increased as well.
The excise tax on natural gas used in industrial production, as well as for powering equipment used in primary processing of agricultural products and ensuring the required operating temperature range, will be reduced; the tax exemption on heating greenhouses, poultry sheds and incubators will remain unchanged.
As of next year, natural resources tax will be imposed on the water used in electricity generation by small hydroelectric plants with a generating capacity of up to 2 MW, and it will be calculated on the basis of the amount of water used. The tax will also be imposed on pyrotechnic articles, and an increased tax rate is envisaged for mineral resources, burial of waste in landfills, as well as environmentally hazardous products, packaging and means of transport, air pollution and emission of pollutants in bodies of water.
Starting in 2014, electricity producers will have to pay the tax on subsidised electricity. Part of the income from this tax will be used to compensate the burden imposed on people with low income by the increase in electricity prices after the opening of the electricity market and thus abolishing the so-called start tariff.
As of next year, the fixed personal income tax on economic activity will be abolished. People currently paying the fixed tax will be able to continue doing so for two more years, but new applications for this tax regime will not be accepted. The pensioners engaged in economic activity will be entitled to apply for a reduced licence tax.
The Saeima has decided that as of 2014 the current threshold of LVL 30,000, including VAT, will be increased to EUR 50,000 (LVL 35,100), excluding VAT, for a car to be classified and taxed as a luxury car.
Amendments also envisage measures aimed at strengthening the fight against the shadow economy and eliminating undeclared salaries, such as prevention of situations where a company, including a microenterprise, can declare the remuneration paid to its employees as a loan and thereby evade taxes. In order to combat fake companies, it is planned to prevent persons from risk groups from registering a company and to eliminate the possibility to register a company at an address that cannot be used for economic activity.
The microenterprise tax will remain at 9% of annual turnover. As of 2015, a 9% tax rate will be applied to microenterprises with an annual turnover below EUR 7,000 (LVL 4,920), and an 11% tax rate will be applied to microenterprises with an annual turnover exceeding this threshold. A subsequent increase of this tax to 13% and 15% is expected in 2016 and 2017, respectively.
The 20% tax will be imposed on the annual turnover of microenterprises which maliciously conceal information on the actual situation of the enterprise and abuse the favourable tax regime to avoid paying taxes on labour. However, microenterprises without any annual turnover or turnover below EUR 50 will have to pay the tax in the amount of EUR 50 to the state budget.
As of the beginning of next year, board members of capital companies who perform their functions without remuneration will have to pay the mandatory social insurance payments in the amount equal to that calculated from the minimum monthly salary, provided that the capital company has an annual turnover, has no employees or has employees with salaries below the minimum.
The state budget for 2014 envisages funding for bonuses to employees who have contributed to the work of institutions involved in solving and preventing financial crime, combating the shadow economy and facilitating fair competition, as well as those who have devised proposals for reducing the expenditures of the state and local governments. Mandatory insurance will be provided to the officials of the State Revenue Service who perform life- or health-threatening investigative duties and control measures.
Starting next year, funds will be allocated for overtime pay to police officers, border guards, fire-fighters and rescuers, as well as prison administrators with special service ranks, provided that in addition to their official duties they ensure uninterrupted work of the relevant service or carry out urgent and unexpected work.
The lump sum benefit awarded to soldiers or public officials serving in international operations who have suffered in an accident and become handicapped or otherwise impaired and who thus qualify for Grade 1 disability will be increased to EUR 71,145 (LVL 50,000).
As of 1 January 2014, after a period of five continuous years of service, staff members of the Ministry of the Interior and public officials of the Prison Administration with special service ranks will be awarded with a one-off benefit in the amount of three monthly salaries received for the service in the last position held by the relevant individual. It is planned to begin payment of this type of benefit in 2019.
Several measures are aimed at strengthening competitiveness, ensuring regional development and increasing availability of services to inhabitants; it is also envisaged to launch a programme for improving the main roads. In order to attract new investments to the national economy, production and research, several tax relief measures will be introduced for entrepreneurs.
Additional funding will be allocated to the National Electronic Mass Media Council earmarked for producing newscasts by regional televisions and for ensuring the work of Latvijas Radio 5 station. Additional funding granted to the State Audit Office will be intended to improve the auditing at local governments and ensuring timely control over topical and significant events in society. Further allocations will also be made to the Prosecutor’s Office and earmarked for prevention of money laundering.
Next year, additional funding will be allocated for maintenance of Līgatne nature trails, the new building of the Latvian National Library, the Museum of the Occupation of Latvia and the Memorial of Žanis Lipke, as well as sustainable development of the song festival tradition and production of the film Dvēseļu putenis.
With the amendments to the budget-related laws, the status of historical heritage will be granted to the narrow-gauge railway Gulbene–Alūksne, thus ensuring preservation and maintenance of this cultural landmark, as well as encouraging its adequate use.
Photos from the extraordinary plenary sitting are available at: http://ej.uz/nnz7Rules for using the content: https://www.saeima.lv/en/copyrights
Saeima Press Service