The Saeima will start to see the package of 2021 budget bills in the final reading today at 9 am. Work on the budget will take place partly remotely in the e-Saeima system.
Politicians themselves admit that looking at budget bills could take at least a full working week, if not longer. A debate on 28 related bills is expected, so Parliament may not be able to decide today on next year’s state budget bill and the medium-term budget framework bill for 2021, 2022 and 2023.
Next year, the consolidated budget’s revenue is planned at 9.58 billion euros and expenditure at 10.76 billion euros. The basic budget has a revenue of 6.68 billion euros and an expenditure of 7.84 billion euros. In the special budget, revenues are planned at 3.15 billion euros, but expenditures – 3.17 billion euros.
The revenue is planned to decrease by 328 million euros next year, but the increase in expenditure – by 744 million euros, while the budget deficit is planned to be 3.9% of the gross domestic product.
“Next year’s draft budget clearly outlines our priorities. It is important that higher salaries will be provided for doctors and employees in the education sector, as well as increased social guarantees for low-income people,” said Mārtiņš Bondars (AP), Chairman of the Saeima Budget and Finance .
Health care will receive the largest amount next year, with an additional 183 million for the previously planned increase in the salaries of health workers.
The salary increase is also planned for teachers, and next year it is planned to allocate an additional 33.3 million euros, but in 2022 and in the following years – 49.1 million euros.
In the area of welfare, additional funding of € 95.7 million is earmarked for a guaranteed minimum income for the poor. 70.7 million are planned to be increased to increase the minimum pension and state social security benefit, 23.8 million in local government budgets are intended to finance the guaranteed minimum income and housing benefit, while 1.3 million euros are planned to increase social guarantees for orphans and children left without parental care.
Next year, 10.5 million euros are earmarked for strengthening the activities of the Ombudsman’s Office, judicial system institutions, the State Audit Office, the Constitutional Court and other independent institutions. EUR 8.91 million is planned to be used for the exit of public media from the advertising market and the implementation of public procurement in commercial electronic media.
The pandemic crisis has highlighted the need to strengthen social protection for those working in alternative tax regimes, according to an annotation to the draft budget. Thus, it is planned that from July next year these employees will have to pay mandatory social contributions. It is planned to maintain the current patent fee regime only for pensioners and persons with 1st and 2nd disability groups.
From 2021, it is planned to reduce the rate of mandatory state social insurance contributions by one percentage point – from 35.9 to 34.09 percent. The social tax is 10.5 percent for employees and 23.59 percent for employers. Changes are also planned for those working in the micro-enterprise tax regime, and in the future only the owner of the enterprise will be able to pay this tax, while employees will have to pay labor taxes as a general rule.
From next year, the minimum wage, which is currently 430 euros, is planned to be raised to 500 euros per month. It is planned to raise the threshold up to which the differentiated personal income tax-free minimum is applied to EUR 1,800 instead of the current EUR 1,200. In turn, the maximum non-taxable minimum is planned to be increased from the current 250 euros to 300 euros per month next year. It is planned to increase the non-taxable minimum for pensioners from the current 300 to 330 euros.
It is planned to set the highest progressive personal income tax rate at 31%. So far, it has been 31.4%.
For another three years – until the end of 2023 – it is planned to maintain the reduced rate of value added tax in the amount of 5% for Latvian fruits, berries and vegetables. In turn, the excise duty on tobacco products will be increased by 5% every year for the next three years, and the tax will also be levied on liquids used in electronic cigarettes. It is also planned to increase the tax on natural resources for certain facilities, including the disposal of municipal waste and hazardous waste in landfills.
The changes will also affect the transport sector, and it is planned to increase the road tax for large trucks, companies for the use of powerful cars, as well as to balance the tax rates for cars and trucks with a gross vehicle weight of up to 3,500 kilograms.
It is also planned to stipulate that invoices paid for goods and services received on the Internet should also be registered in the check lottery.
According to macroeconomic forecasts, which take into account the crisis caused by the pandemic and the implemented support measures for the economy, the gross domestic product at constant prices will decrease by 7% this year. Next year, economic growth will resume, and GDP growth is planned for 5.1% next year, but in 2022 and 2023, GDP growth will stabilize at 3.1%, according to the annotation to the draft budget law.
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