Right decisions of Latvia overthrew Estonia from its leading position

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Even if Estonia established the same so-called wonder tax as Latvia, we would never outdistance Latvia, but would just become equal with our neighbors, said Priit Raudsepp, the head of tax area in Glikman Alvin. Yesterday, Latvia passed an amendment by which the micro companies whose turnover is 7000-100 000 euros, shall pay only 9% VAT during the first three years and during the fourth year, the tax rate shall increase to 12%. These companies must not pay social, income and unemployment insurance taxes, as well.

Priit Raudsepp, the head of tax area in law office Glikman Alvin said that Latvia works hard, looks for opportunities and makes them happen. “What Latvia does, is great,” he said. In addition to the amendment of VAT incentive of starting micro companies, the attitude of Latvia is illustrated by the fact, according to Raudsepp, that the exemption of selling shares of foreign subsidiaries was established there. The new coalition agreement in Estonia has in it that Estonia considers the same change, but even after carrying it out, Estonia would not get the advantage in front of Latvia, but would just become equal with its neighbor, said Raudsepp.

Raudsepp said that Latvians set their minds to something and act upon it. “When before Estonia was considered to be the pioneer in the Baltic States, then now it has been told for a while that our tax environment is getting clearly behind from the one of Latvia,” he said. Raudsepp thinks that the positive tax changes in Latvia influence the decisions of foreign investors, who see Baltic States as whole, the most. “As Estonian lawyer, it is difficult to say, considering all aspects, that the tax environment here is the best, “ he noted. If the foreign investor finds that it is more reasonable to set the head office in Latvia, all the money that could have come to Estonia, goes there, according to Raudsepp.

Raudsepp says that Estonia should follow Latvia’s example and analyze what are the important things in tax law to be implemented quickly. “Little detail changes, like the reduction of social tax by one per cent, are not enough. The style of coalition agreement “let’s see, consider and analyze, is it worth at all to make any changes” is not very useful”, said Raudsepp. He says that topics to be dealt with are many. “Maybe a commission should be called to brainstorm ideas, because it can be seen now that politicians are lacking ideas and to be honest, no one seems to be concerned about it, as well,” he said.

He added that new and principle innovations must be searched for – placing the eggs from one box to another is not useful in any way. Raudsepp stressed establishing the social tax ceiling which was agreed upon in the coalition agreement from 4 years ago, but has not been in the two last agreements.

Article was written by Eliisa Matsalu and it was published in Äripäev on 24.04.2015.

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