BB.lv: Latvian economy lacks investments of 2-3 billion euros

He noted that what was expressed in the latest economic report of the Organization for Economic Co-operation and Development (OECD), presented this week regarding Latvia, largely coincides with what is currently being implemented in Latvia. “The recommendations that come from the OECD are also on our agenda,” the minister said.

Valainis also noted that the Latvian economy lacks investments in the amount of 2-3 billion euros, so first of all it is necessary to develop the capital market. “The amount of investment that our economy lacks is not five, ten or 100 million euros, but 2-3 billion,” he said, adding that such an influx of financial resources can only be achieved through a serious overhaul of how the Latvian economy is financed , and the development of the capital market is one of the prerequisites.

The minister also noted that the OECD report states that the tax burden for low-paid workers in Latvia is too high, and also stated that the government is determined to find a solution so that the tax burden on low wages in Latvia is reduced, or rather, it is currently underway in Latvia work on labor tax reduction models.

“People are not able to pay such a tax burden, thus a shadow economy is formed,” Valainis said, adding that Latvia is uncompetitive in the field of labor taxes at the Baltic level, including especially in the wage group up to 2,000 euros.

It has already been reported that the latest OECD report highlights the need to reform the tax system. At the same time, the main problem was highlighted that high social contributions for people with low and middle incomes reduce the desire to formalize labor relations. Informal labor relations are widespread, and personal income tax progressivity remains low. To address these issues, the OECD recommends reducing the labor tax burden on the poor, for example by lowering social security contributions for lower incomes or making personal income taxes more progressive.