Compulsory minimal state social insurance contributions should be paid by all Latvian citizens, because everyone should be socially protected independently regardless of their sector of employment, said Culture Minister Nauris Puntulis.
When asked about a comment on culture industry’s workers’ arguments that minimal social contributions would not guarantee financially secured retirement anyway, the minister said “the phrase about financially secured retirement is somewhat insincere”. “They will grow old and will get their benefits,” claims Puntulis.
He admits the current tax regime allowed culture industry to work and earn money without being socially insured.
“The situation should be this way – we need to change it,” said the politician.
Earlier Finance Ministry’s developed tax changes mentioned abolishing the special tax regime for royalties in 2021.
Finance Ministry’s report on proposed changes showed that the goal of changes was improving residents’ social security. Similar to other alternative regimes, the social contributions of residents that receive royalties are currently low, which increases the number of residents that may not be socially secured in the future. Finance Ministry adds that royalties are often used for tax optimization purposes.
The changes to taxes are intended to ensure the special tax regime for royalties is abolished in 2021. A solution is proposed that would allow recipients of royalties to choose – either register their economic activities or use the same special regime used by persons who receive income in accordance with a contract signed with a company without registering their economic activity.
“This is why royalties as a special form of income will not be outlined separately in the Personal Income Tax Law,” stresses Finance Ministry.
Culture Ministry explains that Finance Ministry’s proposed solution and schedule in relation to changes to the royalties system will generate more shock for the culture sector, which still has not recovered from the COVID-19 crisis. It will generate a major risk of a significant number of self-employed persons in the culture sector suffering an even larger decline of income from creative activity, which means they could leave the sector entirely. This, in turn, could negatively impact the variety and longevity of culture in Latvia, warns Culture Ministry.
The ministry says that Finance Ministry’s proposal for royalties is considered more of an increase of taxes in culture without offering them a transition period and it is planned to be adopted soon – four months from now, in 2021.
Culture Ministry did not support Finance Ministry’s proposal and its future. Puntulis previously urged the prime minister not to add it to the government’s September 2 meeting’s agenda.
Because of this, the government did not discuss abolishment of royalties in 2021 last week. After the government meeting Finance Minister Janis Reirs reported that in relation to royalties it was planned to offer a new solution, which would be announced later.
Reirs explained it was not planned to liquidate the royalty system, only organize it. (BNN/Business World Magazine)
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