Foreign Investors Council in Latvia: planned tax reform is merely for looks

The tax reform planned by the Cabinet resembles "cosmetic repairs" when it should be a "capital repair", said Zlata Elksniņa-Zaščirinska, member of the Board of Foreign Investors Council in Latvia (FICIL), in an interview to Latvian Radio September 10.

The FICIL member said foreign investors look at tax policy as an instrument and it is important to see what changes in tax policy are supposed to be achieved. Any change in personal income tax (IIT) that would put more money in citizens' purses “is always a good thing”.

Foreign investors have been talking for some time about the fact that government could be more willing to invest in education.

"We are talking about the various steps that the government could take, let's say, to include a much larger deductible cost base related to education, training, retraining," Elksniņa-Zaščirinska said.

According to her, the changes to the proposed tax reform have not yet been observed: the government is working on changes in tax rates, the non-taxable minimum.

"At the moment, I think the measures that have been taken, are more of cosmetic repairs. We talk about capital repairs sometimes, then this is a cosmetic repair.

I think it is high time we thought about about such capital repairs, directly through personal income tax, national social insurance, and in all health and pension-related areas," said Elksniņa-Zaščirinska.

At the same time, she said that entrepreneurs don't like frequent tax changes and that the results of the previous tax reform should be evaluated before making the capital repairs of the system. “As long as it is not clear, it is difficult to anticipate any new changes,” said Elksniņa-Zaščirinska.

According to foreign investors, more attention should be paid to non-tax issues. For example, the reduction of administrative burdens by tax payments, combating of the shadow economy. These are issues more related to tax collection, digitalization.

The Council of Foreign Investors in Latvia will submit a total of 11 proposals to the government on Friday, September 11, on how the investment environment should be improved in Latvia.