The impressive inflation experienced in the past couple of years, which led to a faster increase in wages, has caused an illogical situation – in fact, any recipient of an average salary is currently considered a wealthy person in Latvia, and the increased Personal Income Tax (IIN) of 23% is applied to him. Latvian entrepreneurs find such a situation absurd, therefore two-thirds call for this threshold to be raised to at least 2,000 euros.
According to the data of the Central Statistics Office (CSB), in the last quarter of last year, the average monthly salary before taxes was 1,610 euros. In certain sectors or regions it was much higher. For example, those working in Riga earned 1,706 euros for a full-time job last year, but the average salary of those employed in at least four industries was close to or over two thousand euros. As you know, the VAT rate is increased from 20% to 23% for employees who earn an average of 1,667 euros per month. Thus, in the opinion of the state, a large part of those working in the capital and also in many other places are rich people who should be taxed with additional tax, even though the wealth of these citizens has not significantly increased due to inflation.
The absurd situation has not gone unnoticed by the wage-payers – the employers. Business management systems You the developer You are Pro in the conducted survey, 31.8% of company representatives indicated that the threshold of the increased VAT should be raised to at least 2000 euros, while another 40.1% of respondents demanded that it be raised even above two thousand euros. Another 14.7% call for the inclusion in the law of a point that the threshold of increased tax cannot be lower than the average gross salary in the country.
“The rapidly changing conditions, which we are experiencing for the fifth year in a row, bring ever new challenges, the solution of which requires proactive action. The case of the increased IIN is a clear example that such “set in stone” borders may become completely inconsistent with reality within a few years, as evidenced by the opinion of almost three out of every four respondents. The solution for legislators could be to purposefully use the advantages provided by digitization – analyzing data in real time, forecasting the development of events. Every user of modern accounting programs clearly saw the trends of salary changes a year ago and could predict the average salary changes quite accurately. Taking these data into account and making timely amendments to the laws, public dissatisfaction could be avoided,” he believes You are Pro the host Viesturs Slaidins.
420 representatives of Latvian companies participated in the survey conducted at the end of March.
About Jumis Pro
Ltd You are Pro deals with accounting systems You development and maintenance. Systems You The growth in recent years was driven by a focus on user needs and innovations, such as the development of a mobile app, the creation of e-invoice processing options, a more convenient user environment, and a solution for employee accounting and payroll You are Staffintegration with the SRS EDS system and quick incorporation of the latest legislative requirements into the system.
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Tags: companies call raising threshold increased VAT euros Economy finance
