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Latvia risks notoriety because of unpredictable taxation policy: foreign investors

Xinhua, September 25, 2015 Adjust font size:

Latvia's taxation policy is highly unpredictable, many legislative regulations do not serve their intended purpose and can be construed too broadly, Girts Greiskalns, executive director of Foreign Investors' Council in Latvia (FICIL), said in an interview with Latvian Radio.

Commenting on FICIL's latest sentiment index "The Investment Climate in Latvia: The Viewpoint of Foreign Investors", which on Thursday was presented at the Stockholm School of Economics Riga, Greiskalns said the survey of foreign investors doing business in Latvia identified three areas they see as most problematic: availability of labor force, innovation and education, as well as the legal environment and government support to businesses.

"Latvia is gaining notoriety with its tax policy decisions -- they are unpredictable," the FICIL representative said, naming as an example the so called solidarity tax the government intends to charge on high salaries. FICIL warns that the new tax will force companies in Latvia's private sector to hire their highest-paid employees in foreign countries.

"We forget the painful lessons of the crisis quickly," the FICIL representative said, adding that quite recently the Latvian government was determined to shift the tax burden from labor to consumption, but that the tax measures planned in Latvia's draft 2016 budget no longer suggested of such determination.

The foreign investors' opinion is worth heeding because the companies in which they have invested provide jobs to about 25 percent of Latvia's working population and ensure 44 percent of the total turnover of Latvia's enterprises, Greiskalns said.

The Latvian government has decided to introduce the so-called solidarity tax and leave personal income tax rate unchanged at 23 percent despite earlier plans to cut to 22 percent in 2016.

FICIL launched its report about the competitiveness of Latvia, "FICIL Sentiment Index", at the Stockholm Economics School in Riga on Thursday. Respondents in the survey were asked to name three to five areas that are worrying them the most in Latvia, particularly regarding the investment environment and long-term growth. They were also asked to identify the areas in which Latvia has been most successful. The survey covered 28 companies operating in Latvia.

FICIL represents the 30 largest companies from various countries and sectors that have made significant investments in Latvia as well as 12 international chambers of commerce. Enditem