The agreement on the 2021 budget with local governments is close, the Minister of Finance Jānis Reirs (JV) informed at an extraordinary meeting of the government on Wednesday.
He said that on Wednesday, a meeting of representatives of the Ministry of Finance and the Union of Local Governments of Latvia (LPS) took place, during which the parties reached many common denominators. “We are close to reaching an agreement,” Reirs described the talks with LPS on the 2021 budget.
The Minister of Finance pointed out that in 2021 a reduction is expected not only in the local government, but also in the state budget. In total, the state budget will decrease by 1.2 billion euros next year, while the local government budget will be reduced by 90 million euros.
Reirs acknowledged that the final details are currently being agreed with the municipalities in order to reach a final agreement on compensatory measures for the reduction of the municipal budget. One of the solutions is the possibility for local governments to borrow.
“The lending offer is being considered. Like the state, local governments could borrow to finance part of their core functions. Municipalities will also have access to funds from the European Union (EU) Recovery Fund and the EU multi-annual budget. costs incurred by local governments in implementing EU fund projects, “said the Minister of Finance.
Reirs added, however, that the planned support of the state to local governments will not be equivalent to the financing guaranteed so far.
LETA has already reported that the government has agreed to change the redistribution ratio of personal income tax (PIT) by increasing the proportion of PIT to be transferred to the state budget. Currently, 80% of PIT enters the local government budget, but the remaining 20% enters the state budget, while from 2021 it is planned to increase the state share to 25%, reducing the local government share to 75%.
By changing the distribution of PIT revenues between the local government and state budgets, local governments will lose 91 million euros, according to the calculations of the Ministry of Finance.
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