Alliances vying for representation in the next Saeima use different methodologies in their pre-election programmes regarding economic development and taxation: some speak of principles, others mention specific rates, while others do not bother with specifics at all...

Everyone in Latvia – from manual workers to entrepreneurs – will be affected by politicians' decisions on tax policy and the business environment. Interestingly, it is not possible to obtain clear answers on these crucial aspects from all the political forces running for the next Saeima based on the programmes published on the Central Election Commission (CVK) website.

Several in the world

“There are political forces that write specifically in their programmes, and there are those that do not specify figures, naming only a principle by which almost anyone can understand whatever they wish, thus avoiding the 'traps' one might fall into after the next elections, as voters or representatives of rival parties could 'take an interest' in how well the promised execution went,” concludes tax expert Ainis Dābols after reading the programmes of all 14 political forces registered for the 15th Saeima elections. He admits that it is difficult for experts to deduce not only the potential outlines of tax changes but also where the money will come from in the state purse if the proposals include reducing consumption tax rates while simultaneously increasing funding for several important areas, such as solving pressing issues in demography and healthcare.

“It seems the programmes of political forces resemble a protocol of good intentions more than they do realistic measures on what to do and how to replenish the state purse while simultaneously ensuring more money in every Latvian’s wallet, all aimed at 'rivers of milk and honey' and the philosophy of 'how can one not promise',” points out A. Dābols. In his opinion, the programmes of political forces found on the CVK website can also be evaluated as follows: parties that think they will be in power, and those that do not really hope to join the group of power-sharers.

“Political alliances that hope to join the ranks of the next government formers do not get carried away with specific tax rate promises, whereas those for whom getting into the next Saeima would be considered an excellent achievement promise much more, because, in most cases, if they do get in, they will likely sit in opposition, and fulfilling the promises will be problematic, if not impossible, anyway,” says A. Dābols. He believes that the politicians' wishes for lower tax rates and increased reliefs will not match the state purse's capabilities unless the state budget funding for some areas is significantly reduced.

The spectre of a wealth tax

“A reduced VAT rate for electricity, water supply or medicines is nothing surprising, yet there are also innovations we have not seen during previous Saeima elections, namely, the proposal to introduce a wealth tax for state officials and deputies whose annual income exceeds 50,000 euros, or 4166 euros gross per month, which would have to be paid by all political leaders or heads of institutions,” explains A. Dābols, emphasizing that the proposers of this idea have not indicated what the wealth tax rate might be and how it would be applied.

“An even more interesting proposal is to apply a wealth tax to residents whose 'total value' exceeds one million euros, as neither the proposed rate nor the formula for calculating this tax is known, and it is unclear what 'total value' means and who calculates it, or according to what algorithm,” says A. Dābols, adding that the situation is similar with the proposed luxury and unused property tax.

“The desire to redistribute other people’s earned money through additional taxes is unlikely to encourage very wealthy people to choose Latvia as their place of residence, as both Europe and Asia and America are competing to attract such people,” comments A. Dābols on the idea, pointing to another interesting proposal – to link the amount of administrative fines to the offender's financial status.

“The idea of fairer penalties could be very tempting; the question is, for example, about an entrepreneur’s financial status and how it is assessed,” A. Dābols analyses the desire to get more money into the state purse from wealthier people.

The real estate tax saga

As many contenders for entry into the Latvian political Olympus propose in their programmes to abolish real estate tax for households on their primary residence, A. Dābols admits that this plan could materialize in some form, although it would be in sharp contradiction with the aforementioned idea of taxing the wealthy with a special tax.

“Abolishing real estate tax for a primary residence will create a hole of several tens of millions of euros in real estate tax revenue; to compensate for this, one will have to look for other income, such as an increased real estate tax on a woodshed, garage, greenhouse or summer house,” predicts A. Dābols. He advises reading what is written in the political programmes carefully, because they offer to abolish real estate tax for households on their primary residence, but do not explain what is meant by it, and everyone can understand it differently.

Young people without taxes or without PIT

The tax expert draws attention to the fact that, just like in previous elections, the programmes of some participating political parties in this election also propose to exempt young people from taxes.

“There is a proposal – let's cancel taxes on young people's salaries in their first year of work, but it is not said whether this proposal applies to the full first year of work, or whether it applies to a pupil’s or student’s holiday job salary, and there is also the question of the impact of such a proposal on the labour market, because theoretically, it could be economically advantageous for most employers to hire a young person for a year and then hire another young person in their place afterwards,” reasons A. Dābols. In his opinion, an equally interesting proposal is to exempt young people under 25 from personal income tax (PIT).

“Perhaps it is bait not only for young people, but also for employers,” answers A. Dābols when asked about tax-free salaries for young people, admitting that this idea may have travelled to Latvia from countries with high unemployment rates.

Wants to lower the capital gains tax

Although the capital gains tax rate – 25.5% – has been aligned with the personal income tax rate, several party programmes express a desire to lower it.

“The fact that currently opposition parties propose lowering the capital gains tax to 15% and even 10% is logical, but if a party currently in power proposes lowering it to 17%, it seems quite serious, even though at least officially such a proposal has not been voiced by them in the context of the 2027 state budget,” concludes A. Dābols. He admits that political forces that will form the next government might 'accidentally' forget what they wrote in their programmes. Once, one political force that wanted to gain power and promised a 15% personal income tax rate, upon getting what it wanted, 'forgot' about it – in other words, it was unable to fulfil it because it would have required withdrawing hundreds of millions of euros of personal income tax revenue from the state and municipal treasury. At the same time, there are political forces that propose directing part of the CIT and VAT to the municipality where the company operates, creating a direct interest for municipalities in attracting investments and business.

“Ideas about how in many places people do not want a 'kitchen' – a factory – near them, but want a 'bedroom', yet it cannot exist without the values created in the kitchen. There is a proposal for the redistribution of the municipal share of PIT between the municipality of residence and the place of work, but at least so far, they have not materialized. Time will tell how it goes this time,” says A. Dābols. As an interesting one, he also mentions the idea of lower tax rates in Latgale.

“In Europe, there are places with lower tax rates in specific territories, but for the most part, these are specific locations,” assesses A. Dābols. He was surprised by the proposal to introduce a 10% sugar tax on sweetened drinks. “For a full set, they would also need a 10% tax on salt and spices,” the tax expert ironizes.

Mist for the economy

A. Dābols believes that the parties have a very tentative proposal – a vision for the economy.

“What can one promise in the current times of transition, when no one can really say how much fuel, heat, and electricity will cost, how much food will cost, and whether the majority of residents in Latvia will be able to make these payments. No one can say when this mist of global uncertainty will clear,” answers A. Dābols to the question of why promises of economic growth are not filled with much specificity. In his view, there are so many unknowns that it is practically impossible to play out all potential development scenarios that may unfold in the interaction of geopolitical, energy, and inflation crises.

“The world is changing. Today is not like yesterday was. Those in the Saeima chairs must be and will have to be able to react quickly and appropriately to the situation. This is not a utopia; it is reality, and that is precisely why professional, knowledgeable people are needed who, sitting in the Saeima, will not be afraid to make complex, perhaps even extraordinary decisions,” summarizes A. Dābols.

Promises

We are changing the rules

— Zero-based budgeting – every budget item for state institutions will have to be justified anew;

— No-deficit budget – must be achieved during one Saeima convocation;

— Deregulation – with every new law, we will repeal at least two existing ones;

— we will reorganize or liquidate ministries and subordinate institutions that duplicate functions. Ministries will no longer purchase policy development and self-promotion through outsourcing;

— we will liquidate procurements that do not meet the possibilities of the AI era, are incompatible with the state’s IT architecture, and the monopoly of large suppliers;

— A cap for green bureaucracy – we will reduce the maximum terms for environmental impact assessments to 9 months;

— Riga City Council – we will halve the number of deputies;

— a fixed 10% micro-enterprise tax on turnover up to 50,000 euros per year;

— we will abolish real estate tax on primary residence;

— Personal income tax – one rate for everyone, stopping the punishment of labour productivity and salary growth;

— we will increase the PIT relief for each dependent child to 500 euros per month. VAT rate for purchasing a primary residence in new projects – 0%;

— 2nd pension pillar – in case of early withdrawal, the state must not regulate the use of residents' savings;

— we will stop the emptying of border areas and strengthen national security by introducing a special economic regime in Latgale and Alūksne Municipality;

— we will achieve an agreement with the European Commission on reducing the VAT rate in this zone to 10% and will grant CIT discounts for 5 to 10 years to companies that invest and create jobs in border areas;

— we will promote entrepreneurship in regions by directing 20% of the company's paid CIT to the municipality where the company conducts its business activity;

— the requirements of the EU Green Deal must not weaken Latvia’s security, economic competitiveness or worsen residents' well-being;

— we will abolish building permits for private houses;

— in state and municipal procurements, at least 95% of food must be of Latvian origin, even if it contradicts EU regulation.

Political party alliance Harmony Centre

— We will increase the number and authority of State Labour Inspectorate inspectors;

— We will defend a 100% surcharge for overtime;

— We will reduce VAT on essential medicines to 5% and introduce stricter control over the formation of medicine prices;

— we will introduce a 10% sugar tax on sweetened drinks, directing the revenue to treating childhood diabetes and obesity.

— We will relocate part of state administration jobs to regions;

— We will found a Latvian State Development Bank to ensure state investment policy – for financing local and green production, microelectronics, semiconductors, cooperatives, affordable housing, energy efficiency, and regional infrastructure;

— By strengthening the implementation of the progressivity principle, we will shift the tax burden from low and medium income of all types to high income;

— We will introduce a wealth tax for state officials and deputies whose income exceeds 50,000 € per year and for residents whose total value exceeds 1 million €;

— We will introduce a luxury and unused real estate tax;

— We will introduce a progressive administrative penalty system so that they are proportionate to the offender’s financial status.

Union of Greens and Farmers

— continuation of medicine price reform, abolition of prescription processing fees, reduction of VAT and expansion of the basket of compensated medicines;

— we will promote a jump in Latvia’s labour productivity with an increase of at least 5% per year;

— service exports, digital solutions and tourism; simpler tax system for small business;

— reasonable implementation of the “green deal”, protecting residents and entrepreneurs from disproportionate costs;

— tax discounts for investments to raise productivity, efficiency and digitalization; export promotion and clusters;

— reduced VAT for essential goods produced in Latvia and medicines; reduced VAT for public catering and accommodation services;

— 0% real estate tax for primary residence; increase in health funding to reduce the need for paid services.

National Alliance All For Latvia! – For Fatherland and Freedom/LNNK

— We will introduce a facilitated tax regime for small and medium-sized enterprises;

— We will concentrate EU funds in defence and growing economic sectors, not in consumption subsidies;

— We will provide investment fund support to productive export-capable companies where employee remuneration exceeds the national average;

— We will increase the share of goods produced in Latvia in state procurements and trade;

— We will ensure automatic inheritance of 2nd pension pillar savings in the family;

— We will grant a 15,000 euro state grant for mortgage cancellation for each child.

Gobzem’s List

— abolition of personal income tax for large families;

— We will set a 12% VAT rate for food products; a reduced 12% VAT rate will be applied to electricity and gas;

— The VAT rate for all medicines will be reduced to 5%;

— we will abolish real estate tax for households on their primary residence;

— we will prohibit the repossession of people's only real estate during crisis times and the application of fines for utility debts;

— we will reduce capital gains tax and corporate income tax (CIT) to 15%;

— we will transform the 2nd funded pension pillar into a fully voluntary one. We will ensure freedom of choice: to continue making contributions, to leave the already accumulated capital in the existing plan, or to withdraw the accumulated money and handle it yourself;

— Every new company will be subject to 270 days of deferred tax holidays, allowing the business to get on its feet before paying dues;

— We will transform Altum into a full-fledged State Investment Bank, which will ensure cheaper and direct access to financial resources for domestic production and exports;

— For self-employed, small farmers and craftsmen, one simple and fixed way of paying taxes will be introduced.

United List – Latvian Green Party, Latvian Association of Regions, Liepāja Party

— No-deficit base budget within four years;

— We will create a Latvian Development Fund, which would manage state assets in a transparent way, without political interference, in order to increase asset value;

— We will stop the regular revising of taxes that hinders the attraction of long-term investments;

— We will achieve the adoption of amendments to the micro-enterprise tax law in order to introduce a 10% rate for natural persons;

— We will reduce PIT on income from capital gains to 17%;

— We will maintain the CIT regime: taxing profit only when it is distributed in dividends;

— We will concentrate state support in high value-added sectors, prioritizing export potential, productivity, research intensity, remuneration and security criteria;

— We will create a state guarantee programme for housing construction in regions in order to increase lending by 2 billion;

— We will create a fairer municipal financial model that will motivate creating jobs, attracting investments and increasing own revenues;

— We will direct vehicle taxes to state roads, primarily transit main roads, regional centre connections and military mobility;

— We will create a favourable tax regime for re-emigrants for four years.

Latvia First

We will reduce taxes by setting:

— 10% tax rate for self-employed,

— 10% corporate income tax (CIT),

— 10% capital gains tax.

— We will reduce the VAT rate for heating, a wider range of food products, children’s hygiene and baby products, tourism and catering sectors to 10%;

— We will abolish real estate tax for primary residence;

— To promote regional development, we will give half of the CIT back to municipalities. We will increase the municipal revenue base by including income from logging;

— We will abolish taxes on young people's salaries in their first year of work.

— We will reduce labour taxes at least to the European average level;

— We will restore the Road Fund by directing 80% of fuel excise tax;

— We will create a strong National Development Bank based on ALTUM, which will facilitate, first and foremost, the financing of small and medium-sized local companies;

— We will determine public-private partnerships (PPP) as the priority funding form for large projects. We will implement no fewer than 10 infrastructure projects whose total value reaches at least 10 billion euros;

— We will expand Via Baltica to 4 lanes, implement the Riga Northern Corridor project and build other motorways in Latvia as well;

— We will determine fair compensation for landowners for the restrictions on economic activity on their properties;

— We will reduce those “green deal” requirements that contradict Latvia’s national interests and increase the prices of our products;

— We will preserve and develop peat extraction and its use in agriculture.

New Unity

— We will create a fiscally responsible budget with a state external debt level below 55% of GDP, adhering to Eurozone fiscal rules;

— We will raise the minimum wage to 50% of the average gross salary, we will increase the fixed non-taxable minimum to 80% of the minimum wage, reducing the labour tax burden for lower income earners;

— We will make real estate tax a full-fledged municipal tax with predictability and social fairness;

— We will develop the capital market and the state development fund;

— We will create a fair and business-promoting tax revenue distribution between municipalities and the state;

— We will target support to export-capable companies, industrial parks, science-intensive products, the capital market and state procurement as an instrument for testing new solutions;

— We will reduce administrative burden, especially for small companies.

New Conservative Party

— We will promote investments and companies' export capacity in high value-added sectors, facilitating the introduction of artificial intelligence and automation solutions;

— We will strengthen small entrepreneurship as the basis for the viability of regions, reducing administrative burden for micro-enterprises and self-employed;

— We will promote the development of high value-added woodworking in Latvia, evaluating the possibilities for large-scale wood processing and pulp production;

— We will stand for a fair compensation system for landowners if the state or municipalities set restrictions on economic activity for nature protection purposes;

— We will create a stable and competitive tax policy for investments, economic growth and regional development, not allowing chaotic tax changes;

— We will propose to abolish the capital gains tax for inherited property and for private individuals' real estate disposal outside of economic activity;

— We will direct part of CIT and VAT to the municipality of the company's place of operation, creating a direct interest for municipalities in attracting investments and business;

— We will propose the redistribution of the municipal share of PIT between the municipality of residence and the municipality of the workplace;

— We will propose the abolition of real estate tax for housing.

Sovereign Power/alliance New Latvians

— abolish the 20-year work experience requirement for pension payment;

— not support raising the retirement age;

— allow withdrawal of 2nd pension pillar;

— compensate unused reliefs for dependants to lowest earners;

— ensure real availability of capital and loans for local companies by transforming ALTUM into a full-fledged national bank with expanded financing functions;

— develop full-cycle production, limiting the export of Latvian raw materials;

— promote the creation of cooperatives for the sale of products produced in Latvia;

— increase the share of products produced in Latvia in public procurements;

— defend the interests of Latvian fishermen by achieving a review of unjustified fishing restrictions in the Baltic Sea; support local fish processing, aquaculture and family businesses that create added value;

— establish a State Social Security Fund, the capital of which will be formed by dividends of state-owned companies;

— not allow partial or full privatization of state strategic companies;

— ensure support for companies that invest in the development and production of new technological products;

— introduce a patent fee of 10% for all self-employed;

— reduce VAT for food, public catering and hospitality to 5%;

— exempt young people up to 25 years old from PIT;

— opt out of “Green Deal” rules that complicate the lives of residents and entrepreneurs;

— in cooperation with municipalities, introduce regional business oases with reduced labour tax for specific fields of business;

— not support the construction of waste incineration plants near residential houses, completely ban waste import;

— not reduce requirements for tree felling, stop uncontrolled forest clearing;

— create a tax system favourable to entrepreneurs, production and innovation;

— introduce at least a 5-year moratorium on raising taxes and introducing new taxes;

— abolish real estate tax for all housing;

— reduce VAT for the management of apartment buildings to 12%;

— split PIT between the primary workplace and residence, restore the 95% PIT proportion for municipalities, decide on CIT redistribution in favour of municipalities;

— abolish vehicle operation tax, introducing the “pay when you drive” principle;

— reduce the A1 certificate turnover criterion from 25% to 10% so that Latvian companies can compete with neighbouring countries, supplementing the state budget with employees’ social contributions;

— reduce VAT to 5% for animal feed and feed additives;

— reduce VAT for electricity, water supply services and all types of fuel to 5%;

— review the fuel price formation structure; apply taxes only up to a lower fixed base price;

— eliminate the practice where state company dividends are used as a hidden and unfair tax burden on society; ensure that the regulator primarily protects the interests of users.

For Latvia's Development

— We will build a stable, predictable and growth-oriented business environment;

— We will reduce bureaucracy, improve the quality of regulation and develop the capital market;

— We will support artificial intelligence, biomedicine, the defence industry, green technologies and science-intensive production;

— We will pay special attention to productivity, exports and capital market development. Our goal – an economy that grows faster than the European Union average and ensures a level of prosperity for Latvian people corresponding to the Nordic standard of living.

Rising Sun for Latvia

— We will double the Latvian economy in 8 years – 2nd pension pillar must be directed into the national economy, reducing the employee's share of social contributions by 6%, crediting savings to the 1st pension pillar and subjecting them to personalized indexation;

— We will reform the municipal financing system, ensuring fairer equalization – we will credit PIT entirely to the state budget, subsidizing municipalities according to their previous share of funding in the state general budget. We will incorporate a business attraction criterion, support for rural schools and regional mobility into the financing mechanism;

— We will abolish real estate tax for a family's primary residence;

— We will reduce the state administration apparatus and bureaucracy – we will freeze the share of administrative funds in state administration, merge and liquidate redundant ministries, abolish state capital company councils.

Political party Stability

— Build the state budget without attracting loans and borrowings;

— Reduce bureaucracy. Merge ministries:
Ministry of Defence with the Ministry of the Interior,
Ministry of Education and Science with the Ministry of Culture,
Ministry of Economy and Ministry of Finance,
liquidate the Ministry of Climate and Energy.

— Reduce the number of Saeima deputies from 100 to 50;

— Reduce the state administration apparatus by 30% within four years;

— Reduce the number of civil servants. Reduce maintenance costs. Maintain service quality;

— Reduce VAT to 12% for staple food products;

— Reduce VAT to 5% for prescription medicines;

— Abolish real estate tax for primary residence.

The Progressives

— We will define priority sectors for promoting the economy and green transition – renewable energy technologies, defence industry and green industry;

— We will introduce broader progressivity, adjusting income thresholds and rates to reduce taxes on small and medium wages;

— We will transition from a minimum social contribution base to proportional contributions to the social budget;

— We will create state support programmes, purposefully supporting companies that can show high added value, significant export intensity in turnover and significant investments in research and development;

— We will support small and medium-sized enterprises by simplifying tax payments so they can create jobs in cities and regions;

— We will reduce the tax burden on small and medium wages by increasing the non-taxable minimum. We will link the minimum wage to the average wage;

— We will determine the volume of logging by balancing economic, nature protection and public interests;

— We will increase the protection of old and biologically valuable forests, and reduce the share of clear-cutting in ecologically sensitive areas;

— We will introduce fair natural resource and climate taxes for companies that pollute the environment, directing revenue to environmental restoration;

— We will implement the EU Nature Restoration Regulation by developing and introducing a national nature restoration plan.

Source: Dienas Bizness based on programmes published on the Central Election Commission website