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Latvian gov't coalition agrees on raising social tax to finance health sector
Last Updated: 2017-06-15 00:00 | Xinhua
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After lengthy debates for months, Latvia's government coalition on Wednesday decided to provide necessary financing for the underfunded health sector by raising social tax.

This means that the rate of mandatory social contributions will be raised by one percentage point, Latvian Prime Minister Maris Kucinskis told reporters after a meeting with coalition partners.

At present, the rate on the social tax paid by employees is 23.59 and the rate on contributions paid by employees is 10.5 percent.

The government coalition expects the tax measure to provide additional 70-80 million euros. Another 120 million euros will be provided by increasing the budget deficit, as dealing with the current crisis in the health sector is expected to cost 200 million euros.

As the government prepares to raise the social tax rate, it also plans to tie the availability of government-funded health care services to patients' payments. General practitioners will be able to use a database containing information on each patients' tax payments to decide whether they are entitled to government-funded examination, tests or treatment.

Those patients who do not pay taxes will only be provided basic and emergency medical services.

Kucinskis said that the tax burden will not increase for dutiful taxpayers as the personal income tax rate will be reduced to 20 percent from 23 percent. Those who do not pay social tax will be able to make fixed monthly payments the size of which has yet to be decided, the prime minister said. These payments are expected to bring additional 20 million euros into the health budget.

Additional 500 to 600 million euros will be needed to fund Latvia's cash-strapped health sector during the next four years, but the tax reform which was agreed by the government in May does not provide a funding source for this purpose. The government then agreed to tackle the issue separately.

The solutions offered by a governmental workgroup included raising VAT to 22 percent from 21 percent or introducing a new health tax, but none of these proposals received the coalition's unanimous support. (1 euro = 1.13 U.S. dollars)

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