The Republic of Latvia has offshored commercial banks since the restoration of the country’s independence. The state collects symbolic taxes from banks on the grounds that in Latvia
- so many banks will gather here that all of them will still throw a significant amount of money to the state,
- banks will create many well-paid jobs,
- loans to local entrepreneurs will fall from the global money circulation in banks,
- banks will decorate Latvia as an attractive territory for business, both with good words in international circles, with their signs in the center of Riga, and with maintaining the demand for Old Riga pubs and Pieriga baths as excellent places for doing business.
The honeymoon turns into a gloomy cohabitation
Some glimmers of fulfillment of hopes have flashed from time to time, but at the moment all these calculations have fallen apart. For four to five years now, officials have been complaining about the lack of competition in the banking sector and promise that they will attract another bank to Latvia right away, where banks are doing so well. Meanwhile, the existing banks have been reducing their total loan portfolio since 2008. In such a calculation, one must remember to deduct the drop in the purchasing power of the loaned money from the episodic nominal growth of the loan portfolio. Banks lay off employees who are not needed, because banks make money from fees for transferring cashless money from company accounts to employee accounts and from employee accounts to housing authority accounts: money is not moved by cashiers, but by computers. And instead of the expected prestige, the banks brought shame to the country as a place for money laundering.
In recent years, the state and commercial banks have lived like quarreling spouses who have to stay in the same apartment because they cannot find other places to live. This year, the measure of the state’s patience became full because banks repeatedly raised the prices of their services and, accordingly, their profits. The state took offense and threatened to start collecting taxes from the banks, but the banks complain to the European Central Bank as their mother (nanny, supervisor) and ask the courts for their good aunts, whose judgments about the bad state of Latvia are already clearer than clear.
Voluntarily payable CIT
Last year, commercial banks paid 321,300,000/831,752=386 in corporate income tax (CIT), that is, 386 percent of net income. The employees of the SRS who provided such data to “Neatsārīga” considered it necessary to add that these numbers “do not indicate tax evasion”. SRS employees are right, because bank payments comply with Latvian laws. VAT is collected only if the banks announce the distribution of profits among the shareholders, but do not pay anything as long as the shareholders are able to agree on how they will jointly use the money obtained from Latvian companies and citizens. In reality, last year Latvia was paid CIT by two banks in order to settle and say goodbye to natural or legal persons who decided to record what they earned in these banks and give this money a new use.
Bank positions among 140 thousand taxpayers
It would be misleading to claim that banks only have to pay VAT and only as much as the banks want. Companies in Latvia are burdened with various taxes, fees and contributions, the total amounts of which are made public by the SRS for each company. The SRS ranks all companies in descending payment order. A total of 138,824 companies are presented in the relevant list for the year 2022. Among the banks, the highest – in 73rd place – “Swedbank” with a payment of 15.8 million euros. Let’s summarize bank tax payments in the table:
Place on the list Bank Payment in millions of euros 73. “Swedbank” 15.8 74. “Citadele” 15.8 75. “Skandinaviska Enskilda Banken” branch 15.4 81. “Luminor” 15.4 99. SEB banka 12 156. “Swedbank ” branch 7.9 165. Rietumu banka 7.4 234. ABLV Banka 5.2 333. “Baltic International Bank” 3.9 339. “Blu Or Bank” 3.8 355. “DNB Bank” 3.7 395. “LPB Bank” 3.3 478. “Swedbank Baltic” 2.9 484. “Industra Bank” 2.8 582. “SIGNET BANK” 2.3 695. Regional Investment Bank 1.9 744. “Swedbank” leasing 1, 8 957. PNB banka 1.4 979. “Inbank Latvija” 1.4
Regarding the table, it should be explained that the branches of “Swedbank” and “Swenska Enskida Banken” do not mean the branches of Latvian companies, but the branches of Swedish parent banks of Latvian companies in Latvia, which are developed in parallel with the subsidiaries of Swedish banks in Latvia. The repetition of the name “Swedbank” in the list emphasizes that it is not only a bank, but a financial group. In the cases of ABLV Banka, “Baltic International Bank” and PNB Banka, the dealings are no longer with banks, but with corporations in various stages of dissolution (liquidation), from which the SRS, however, appears to be scraping something.
Bank payments look impressive not only compared to the amounts of money in circulation in households. Here, the largest banks have taken places in the second half of the first hundred largest taxpayers, the practically unknown “Inbank” has paid 1.4 million euros to the state and remained in the first thousand among almost 140 thousand listed payers, of which more than 100 thousand companies are just ghosts, the state does not pay much; but banks pay even after their actual death.
Hospitals pay the state much more than banks
Banks’ prestige is undermined when bank payments are compared with payments from other companies. As it has already been said and shown, in the high 73rd place “Swedbank” with 15.8 million euros, to which several more million euros from the “Swedbank” financial group must be added. Yes, but in 65th place, with a payment of 17.2 million euros, the Daugavpils regional hospital, which drew attention to itself in recent days by being practically bankrupt, unable to pay salaries to employees, etc. In the person of the State Minister of Health, Hossam Abu Meri, she was just forced to promise that the hospital’s debts would be paid. Riga’s big hospitals, which pay tens of millions of euros in taxes to the state, are at a height beyond the reach of the banks, so that the payments of not only financial groups, but of all banks, are counted together.
To forgive “Swedbank” that it, as the largest commercial bank by assets, should serve as a negative example in comparison, that from a bank which last year
booked 135 million euros in profit, the state took less money than from the company, which was led to bankruptcy and will now have to be saved at the expense of other taxpayers. Of course, also at the expense of banks, only the share of banks in tax payments is small compared to the payments of hospitals, utility service providers and other companies that people really need. On the other hand, Swedbank or any other bank can disappear even today. People will not notice that the flow of their money from the payer to the sellers of goods and services is maintained by the computer of the next financial institution.
Will the state break its teeth chewing money from the banks?
In the first nine months (three quarters) of this year, “Swedbank” collected 202 million euros in profit, and the Latvian banking sector – 564 million euros, which is 2.6 times more than the profit of the corresponding period of 2022. In such conditions, the state got the courage to change the procedure in which CIT banks pay, ie they practically do not pay at will and also generally pay much less than other companies in relation to their turnover, revenues and profits.
First of all, Latvia’s next year’s budget has been drawn up with the calculation to collect VAT of 140 million euros, regardless of the banks’ decisions on profit sharing, ie on non-sharing. Secondly, a complex scheme worth 80-90 million euros has been created to partially compensate bank mortgage debtors for the increase in their interest payments at the expense of the banks. The state’s interest is that the money returned to the state’s debtors will be collected very quickly through consumption taxes, as opposed to the situation where the banks collect this money and transport it to nowhere. As you can see, 140+90=230 is only part of the increase in bank profits in 2023. However, the banks show readiness to fight against the precedent that Latvia allows to demand money from them that is higher than voluntary and symbolic payments.
2023-12-22 03:15:43
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