On August 23, AmCham Board met with representatives from the Finance Latvia Association (FAL) to discuss the proposed tax changes by the Ministry of Finance. Among the issues discussed were concerns about the lack of predictability and non-transparent decision-making that may further affect the ability to attract and retain foreign investment and maintain economic competitiveness. With regard to the tax progressivity, there was a general understanding that while the proposed changes would benefit the low-wage earners, they would not address so-called envelope wages and disproportionally affect higher-paid groups, thus increasing the labor tax burden and risk of losing high-skilled specialists that are already in high demand. As previously recommended by OECD, the tax burden should be shifted from labor to other income, property, and environmental taxes.

In addition, on August 19, the Lead of AmCham Tax work group and AmCham Executive Director met with representatives from the Ministry of Finance and LIAA to discuss the reclassification of tax on dividends for private investors. In the current framework, private investors who are also taxpayers in other countries with different CIT and PIT systems cannot apply for double tax treaty benefits. As a result, profits earned by investors are subject to tax both in Latvia and the investor’s country of tax residence, thus hurting Latvia’s ability to attract and retain investment compared to other countries in the EU.