The most effective way for the government to help Latvian companies improve their competitiveness in export markets and promote development is to reduce labor taxes. This is the most popular opinion in the Latvian business environment, and 83.4% of the companies surveyed by Jumis Pro, the developers of the business management system Jumis, agree with it.
The pollsters asked the respondents to choose three out of ten actions that would help the company develop and achieve success both in the domestic market and in the export market. More than four out of five respondents agreed that high labor taxes are the biggest obstacle. Companies operating at the Baltic level have long drawn attention to the fact that hiring labor in Latvia is much less profitable than in Estonia or Lithuania, and this reduces the motivation of business managers to expand operations in Latvia and hire employees here.
The second most valuable help from the point of view of the respondents would be the reduction of the administrative burden. 74.8% of the respondents believe that the company could work more productively if the reporting to controlling state institutions and the performance of various bureaucratic procedures were simplified.
Opinions are divided on the next improvements – three answer options received a similar number of votes. 36.1% tend to agree with the view that the government should purposefully create an attractive business environment for investors. This is especially relevant now, when in the study “Foreign Investment Environment Index 2023” conducted by the Riga School of Economics and the Foreign Investors Council in Latvia (FICIL), the investment climate in Latvia received the lowest rating in history – 1.9 out of 5 points. At the same time, investors rated the work of policymakers in attracting investments significantly lower – with 2.4 points on a 5-point scale. This is the lowest rating since 2017.
35.6% of the respondents see the solution in reducing the VAT rate, while 30.9% would like to see a targeted increase in the volume of Latvian exports and the general economy. Advocates of this idea emphasize that a larger economy automatically means higher tax revenues and, accordingly, a larger state budget.
“When surveys regularly measure the mood of companies, the painful issues are very clearly marked. Along with the relatively rapid growth of wages in the years of high inflation, the burden of labor taxes has reached the top of the list of the most important challenges for companies. Employers hope and expect that due attention will be paid to this issue in the tax changes proposed in the fall “Meanwhile, only 18.3% of respondents are interested in recent needs such as compensation for energy costs, and only 21.4% of companies would like loans with lower interest rates than banks currently offer,” comments Jumis Pro head Viesturs Slaidiņš.
420 representatives of Latvian companies participated in the survey conducted at the end of March.
