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81% of Latvians want tax differentiation depending on income

RIGA  - As many as 81 percents of people in Latvia would like the income tax to be differentiated depending on the size of income so that the tax would be applied progressively, according to the Swedbank survey about the preferred changes in labour taxes.

There was 46 percent of respondents, who would fully approve of the principle that people with higher income should pay higher taxes, and 35 percent, who would approve of this principle partially. Support to tax progressivity tends to grow with the age of respondents while respondents from high-income groups are more inclined to disapprove of the suggestion.

When asked what kind of changes in labour taxes were needed most, 46 percent mentioned the increase of the minimum non-taxable income and 35 percent the reduction of the personal income tax rate. The suggestion about raising the minimum non-taxable income is more popular among the respondents older than 50 years and rural population while young people find a reduction of the personal income tax rate more appealing.

Support to other possible tax changes is much lower. For example, only 6 percent would welcome the reduction of the social tax and 4 percent would prefer higher allowances for dependents.

"The Latvian tax system reform planned by the government would affect each and everyone in Latvia, therefore, we wanted to find out what are people's expectations and what they want to be changed. The respondents' answers are mostly aimed at reducing wealth disparity which is one of the goals of the reform," said Reinis Jansons, the head of Swedbank Institute of Finances.

He said the tax reform was also a huge challenge concerning facilitation of the economic growth, effective tax collection and reduction of the shadow economy. It is good that specific solutions are being proposed to increase the competitiveness of the Latvian economy and to reduce inequality, the Swedbank representative said.

He said that, regardless of their income, all households would generally benefit from the planned tax reform which includes raising the minimum monthly wage from EUR 380 to EUR 430, increasing tax allowances for dependents from EUR 175 to EUR 250, much higher ceilings of the differentiated minimum non-taxable income and reduction of the personal income tax from 23 percent to 20 percent.

The survey was carried out in April this year in cooperation with Snapshots pollster among 700 respondents aged 18-74 years across Latvia.

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