Latvian Parliament Rejects Property Tax

by Ulrika Lomas, Tax-News.com, Brussels

23 September 2009

The Latvian parliament has rejected proposed new property tax initiatives, despite its current loan agreement with the European Commission and the International Monetary Fund (IMF).

The bill on higher property tax on real estate was defeated by the People’s Party, the largest party in the ruling coalition, which had already rejected the idea of tax rises to generate the additional LAT500m (USD1.05bn) required next year to meet the terms of its international bailout.

The proposal submitted by the cabinet would have seen a rate of 0.2% being imposed on homes. The tax would have been levied on the cadastral value of the property.

Latvia’s Finance Minister, Einars Repse, fiercely criticized opponents of the property tax, emphasizing that a failure to increase revenues from the tax bill would merely result in further spending cuts.

Latvia agreed a EUR7.5bn loans program last year with the EU and the IMF, and has so far received funding of EUR2bn. However, the loans are backed by an economic program, to which all ruling parties have signed up, to drastically cut spending this year and next, or raise revenues, in order to bring the state budget deficit under control.

The government is due to hold a special meeting on the 2010 budget shortly.

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