The additional tax for the poor will be 150 million euros a year

The Ministry of Finance informs that as a result of the introduction of the minimum state social insurance contributions, the state revenues should increase by 64.2 million euros in the next year during the transition period and by 154 million euros in the following years.

In the annotation to the amendments to the law “On State Social Insurance”, the Ministry of Welfare refers to the data of the State Revenue Service (SRS) that 273.6 thousand people or about 1/3 of the country's employees earn less than the minimum wage per month and pay less than 150 euros, which would correspond to a social insurance contribution from 430 euros. The next sentence of the same annotation provides different data from the State Social Insurance Agency (SSIA). It knows about 110.6 thousand socially insured persons, whose income in 2019 averaged between one euro cent and 429.99 euros. The difference between 273.6 and 110.6 thousand low-paid workers exceeds 150 thousand. Then either the contributions of these people to the SRS have not reached the SSIA and do not create social insurance savings for these people (in case of sickness, unemployment, pensions), or maybe the SRS or some other institution has paid for them and thus removed them from the extremely low paid group of employees. Both versions sound fantastic, but there is no better or official explanation for these differences.

The link to the annotation of amendments to the law prepared by another ministry turned out to be the answer the Ministry of Finance sent to Neatkarīgā when asked about the extent to which the current tax reform will achieve "fair taxation", which Minister of Finance Jānis Reirs stated as his goal at the beginning of the year, in an interview on January 23. As an unfairness, he pointed out that “in the general tax scheme are 600,000 workers who pay all taxes. On the other hand, 250 thousand workers are in various schemes, where the average tax is paid from 200 euros”.

The basic idea of ​​fairness is to set a minimum social insurance payment for all employees in Latvia, regardless of how much they earn.

If they do not earn anything for a month, then they should still make this payment so that they can receive money from the social budget if they suffer from illness or other misfortunes. However, this requirement has been relaxed, not applying to working prisoners, pensioners, the disabled, etc., whose total number is a little over 70 thousand people.

When the government promised compensation for workers made redundant due to the state of emergency in Covid-19, a tandem between the Ministry of Finance and the Ministry of Welfare pledged to pay downtime benefits to 12,000 self-employed and 13,000 micro-enterprise taxpayers (in Latvian). These calculations were preceded by the impression that it was these groups that accounted for the majority of low taxpayers. It turned out that there are others. Their search and recognition has not yielded convincing results. Needless to say, this is evidenced by the huge difference in determining their total number.

One of the side effects of the inability to recognize low taxpayers is doubts whether the SRS will actually squeeze an additional 150 million euros from these people. The purely quantitative question is whether the money will have to be squeezed out of 273.6 thousand or 110.6 thousand people. Respectively - whether each employee will have to pay an additional 197 euros per year for the right to work in Latvia, or 488 euros per year. There are even greater doubts as to whether it is really possible not only to impose but also to collect an additional tax from the poor precisely because they are poor. There is still a version that in reality they are not quite so badly off and might not be poor at all. From this point of view, too, the question arises as to what kind of social (or gender, or age, or professional, or territorial) groups those are with a total of at least over 100 thousand people whose well-being has not been noticed so far.

In the budget package of 2021, the government redirected the obligation to search for these people from the SRS to municipal social services. In a flash followed a call from the Social Workers' Association to prevent social work specialists from becoming tax inspectors and to ask Ramona Petraviča for resignation from the post of Minister of Welfare, for allowing such amendments to the law. The Minister responded with understanding. Although the package of draft budget laws has already been submitted and accepted for consideration in the Saeima, what is written there is not “set in stone”. All that has happened is that it has become possible for the general public to discuss what, if we believe R. Petraviča, the officials of the Ministry of Welfare have told the officials of other ministries, that such regulation is not a good idea.

The main cause of concern for social workers was the congestion of social services with many thousands of new clients. How many thousands there will be - no one knows. The Social Workers' Association referred to the SSIA data already mentioned here about the lack of sufficient social contributions for 110.6 thousand people who could go to social services, which would allegedly have the right to give discounts (or give documents justifying discounts) from the minimum payment of social contributions. If so, the fact has been omitted that such people will become noticeably more next year if the minimum wage is raised to 500 euros per month and the social insurance payment will increase to 170 euros per month. On the other hand, R. Petraviča reassured the social workers that an unknown number of rich mini-wage recipients in social services would not occur anyway and would not burden anyone with themselves.

The statement of social workers also draws attention to the phrase that “according to Eurostat data, in 2019 there were a total of 95,600 self-employed persons in Latvia, while information published by the SRS shows that in the fourth quarter of 2019 there were 29,292 self-employed persons in Latvia who make state social insurance contributions". R. Petraviča's new version of recognizing these groups sounded as if perhaps only three thousand "creative personalities" would be placed under the supervision of social services. In this way, too, it is possible to emphasize the general uncertainty about who are those people, from whom the state will try to collect 64 million euros next year and afterwards about one and a half hundred million euros a year in addition to the existing payments.