Budget, Financial Services, Latvia, Legislation, Taxation

According to the Finance Ministry's estimates, the positive fiscal effect from the decision not to lower the tax will reach EUR 60.63 million in 2016, with EUR 12.13 million of that amount going to the central government budget and EUR 48.5 million to municipal budgets.

The tax measure is expected to provide EUR 63.75 million in additional budget revenue in 2017 and another EUR 67.35 million in 2018.

In 2012, Saeima decided to gradually lower the personal income tax rate in following years. The tax rate was supposed to go down from 25% to 24% in 2013, to 22% in 2014 and to 20% in 2015. These plans, however, were later changed.

In the spring of 2015, the Finance Ministry announced that consolidation measures, equal to 0.3% of GDP, will be needed in Latvia's 2016 budget. Both Prime Minister Laimdota Straujuma (Unity) and Finance Minister Janis Reirs (Unity) questioned the possibility of cutting the personal income tax rate from 23% to 22% in 2016.

Latvia's businesspeople, particularly the Latvian Chamber of Commerce and Industry, slammed the government for not keeping the promise to reduce the tax rate as planned.