The Latvian government has backed an austerity package, which will see the introduction of a progressive income tax system, a new real estate property tax, and from 2011, a rise in VAT and social security contributions.
Although no details have as yet been released regarding the format of the new taxes, it is understood that by 2010 Latvia will have introduced a top band for higher earners, which will be significantly higher than the current rate. It is expected that income taxes for Latvia’s less affluent taxpayers will be will be maintained at 19%, or increased nominally, while the minimum monthly wage is expected to set to decrease from LVL180 to LVL140 (USD280).
Latvia is to again cut government spending within the budget, this time by LVL500m (USD998m). The Latvian government has already significantly reduced its costs, in part by reducing public sector wages twice, in the first instance by 15% followed by a further 20% cut.
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