The regulation of royalties will be hotly debated in the Saeima

The deputies of the Saeima, who will have to approve the changes in the regulation of royalties proposed by the government, still lack information to evaluate them adequately, but the skepticism of the legislators cannot be disguised. Meanwhile, the Latvian Association of Press Publishers is sounding the alarm, as the Cabinet of Ministers' intentions show that the industry must take into account unplanned expenses that are no longer subject to amortization.

Neatkarīgā has already reported that the government intends that until July 1, 2021, the recipients of royalties will be able to continue their financial relations with the state without changing anything in them. In turn, after July 1 of the following year, it will be necessary to choose one of three options, namely: tax treatment for the author as a self-employed person who has registered his economic activity; the general tax treatment for employees; payment of taxes from turnover. If the author chooses the third option, then the royalty payer will be obliged to pay 25% of the royalty amount to the state in taxes. Thus, by agreeing on a fee of 500 euros, the customer will have to pay 125 euros as a tax, but the contractor would receive 375 euros for their work. In addition, the 25% rate is only valid for turnovers of up to 25,000 euros per year. In turn, if the fees exceed 25,000 euros per year, the tax rate will be 40%. Without consultations

The proposed timeframe for the reform is justifiably unsatisfactory for the Latvian Association of Press Publishers.

One of the peculiarities of press publishing is that the prices for subscription for the year are determined in August of the previous year. Therefore, now, in October, all prices for 2021 have been set and there is no possibility to change them. Therefore, it is absolutely unacceptable to apply additional taxes in terms that are earlier than January 1, 2022,

says Māris Ančs, Chairman of the Board of the Association.

It is also incomprehensible that no changes in the regulatory enactments - in the Law “On State Social Insurance” and “Amendments to the Micro-Enterprise Tax Law” - have been discussed with the representatives of the industry.

"These changes have been developed in a hurry, without going into the specifics of press publishing and without taking into account the dramatic consequences it will have for the industry. The Latvian Association of Press Publishers believes that the various aspects of these amendments have not been assessed - the impact on employment, as well as on the state budget in the long run,” says M. Ančs.

Logically, not formally

The first reading of the amendments to both normative acts is still being worked on, and the deputies of the Saeima, who will have to approve them, lack full information, but the belief that the plans of the Ministry of Finance satisfy the deputies is not heard when speaking with the deputies concerned by the issue.

"We Conservatives are, of course, in favor of a fair tax system, but at the same time we do not want it to be discriminatory or leading to poverty in any way. Of course - there must be justice and social protection, everyone must know what will happen to their pension or health, but the system must also be logical, so that taxes do not have to be paid for nothing, ”says Krišjānis Feldmans, Deputy Chairman of the Saeima faction of the New Conservative Party, mentioning that the first reading version of the draft laws is still being worked on.

Wrong timing

"New Unity" and "Development/For!" representatives did not yet have sufficient information to make a worthy comment on the government's intentions, but Dana Reizniece-Ozola, a member of the opposition Union of Greens and Farmers, had something to say.

The politician points out that tax reform at the time of budget adoption is not acceptable, as it does not allow entrepreneurs to prepare for the forthcoming changes, and the ruling coalition is too tempted to plan taxes together with public spending. "The publishing industry is not the only one with contracts. Now the tax burden is changing, but the entrepreneurs can do nothing. Increasing taxation of royalties in the post-crisis period is a very bad move, ”says D. Reizniece-Ozola, adding that the current offer shows that the Ministry of Finance has not understood the specifics of creative people's work and life.

In any case, there are tensions in the Saeima's remote virtual corridors, which shows that not only the opposition but also the coalition partners will try to correct what the Ministry of Finance intends to do in parliament.