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Latvian government coalition divided as decisive vote on tax regulations looms

Xinhua, December 15, 2016 Adjust font size:

Latvia's center-right government coalition remained divided over Prime Minister Maris Kucinskis' latest tax initiatives on Wednesday, while lawmakers prepared to vote on the draft legislation in the first reading on Thursday.

Although Kucinskis said today that he would be ready for a compromise with the center-right Unity party and offer microenterprises either to pay higher 15 percent tax and no social security contributions or 5 percent tax plus social security contributions, Unity called this a no compromise and said it would submit its own proposals to parliament ahead of Thursday's vote.

While the prime minister's Greens and Farmers Union wants to offer the choice between the two tax regimes only to those businesses whose annual turnover does not exceed 40,000 euro, Unity insists on offering this choice to all small businesses.

Solvita Aboltina, the leader of the Unity faction in parliament, also stressed the necessity to provide a functioning social security mechanism for low-paid workers.

Kucinskis, however, has rejected as unacceptable Unity's proposal to postpone until September 1, 2017 the requirement for all microenterprises to pay minimum social security contributions for their employees.

Under the legislation passed by lawmakers in November, the requirement has to take effect on Jan. 1, 2017.

The prime minister told reporters today that he had informed Unity about his position and that a compromise deal now hinged on Unity.

After his weekly meeting with the prime minister, Latvian President Raimonds Vejonis lambasted the coalition for "messing up" the situation with tax regulations that are supposed to take effect in less than a month.

The president said the proposed regulations were unfair both to entrepreneurs and employees, and set Dec. 20 as the deadline for a compromise solution, saying that he will still have to promulgate the legislation before the winter holidays.

Under the previous plan, which was adopted in 2015, all working people in Latvia, including part-time employees and those earning less than the minimum wage, would be required to pay 97 euro a month in mandatory minimum social security contributions from 2017, while the microenterprise tax would remain at 9 percent next year. Endit