Taxes on Latvia's small businesses to go up in 2017

Latvian lawmakers on Tuesday scrapped the plan to introduce mandatory minimum social security contributions but raised taxes on small businesses as they held the second and final reading of Prime Minister Maris Kucinskis' tax proposals for microenterprises.

The draft amendments were passed by 78 votes and with the support of Unity, the center-right coalition partner whose representatives had previously harshly criticized the prime minister's tax initiatives as Unity is concerned about microenterprise tax payers' lack of social insurance.

Under the final version of the tax amendments adopted at the extraordinary parliament session, the microenterprise tax rate, which currently stands at 9 percent, will be raised to 15 percent next year.

Lawmakers, however, made an exception for the smallest businesses whose annual turnover does not exceed 7,000 euros (7250 U.S. dollars), setting the tax rate at 12 percent of their turnover.

The latest tax amendments also stipulate that 70.4 percent of microenterprise tax collections must go to the social security budget next year. In 2018, the figure will increase to 80 percent.

The above amendments, however, will only serve as a temporary arrangement, as the parliament ordered the government to draw up by June 1, 2017 a new tax regulation that would be specially adjusted for small businesses and would replace the current microenterprise tax system. Endit