The doctors of economics from the World Bank have examined the Latvian economics, diagnosed and wrote out a prescription.
The doctor’s appointment cost to the patient a fortune — 300 thousand euro the government paid for treatment by the elite specialists. Although, the prescription somewhat disappointed — such prescription could have been written out by a local paramedic from the Faculty of Economics of the University of Latvia. And not for 300 thousand, but for 300 euro. Well, indeed, since the money has been paid, it is interesting to get acquainted with the prescribed miracle medicine.
The portion of eternal prosperity of the state from the World Bank is simple — you need to gather more people and undertakings and then impose on them additional taxes. And so that no one unconscious subject of economics could hide from the taxmen in a shadow.
If to translate the foregoing into the language of economics, then earnings from tax revenues in Latvia can be and must be increased, a) by expanding the taxation base, b) by marking up tax rates, and c) by reducing a possibility of tax dodging.
The assurance in the possibility of such development is based on the fact that revenues from corporate income tax in Latvia is lower than in other countries – members of the EU and of the Organization for Economic Cooperation and Development, which Latvia officially joined on 1st July. And our rate is lower, and the application base is narrower.
Indeed, the total tax rate in Latvia makes up 35% and is the lowest in the Baltic States. But it is – the total rate – is far from the European bottom. Among the countries – members of the EU and of the European Free Trade Association there are, at least, 10 states, where the tax burden is lower than in Latvia.
Among other offers of the World Bank — cancellation /reduction of corporate income tax privileges for investments and donations. The same is suggested to do with the reduced rates for Value Added Tax.
Yet another advice from the World Bank – to introduce progressive labour taxes – higher income tax rates for those, who are paid large salaries, and lower rates for low paid workers. The logics of the offer lies in that in Latvia the gap between the prosperous and poor population is bigger than in the majority of countries of the European Economic Zone, inter alia, in those, where the Latvian residents emigrate to. Consequently, if to take away from the rich and hand out to the poor, then happiness would come and emigration would slow down.
Here two moments should be noted.
First, the progressive system already exists in Latvia. Last year a so-called solidarity tax was introduced — on salaries exceeding 4 thousand euro. Recently the Ministry of Economics established that the number of owners of such salaries in the country has sharply dropped.
And, second, the ideas of Robin Hood do not work with the relationships between Latvia and the World Bank — a situation, when a poor country pays a rich international organization contradicts the essence of advices of the very same organization.