Tax incentives for micro enterprises – Latvia's experience

Abstract

The author continues studies on tax incentives for micro enterprises. Latvia has introduced a special tax regime-a micro-enterprise tax (MET), the improvement of which still continues to reduce its application for unfair tax competition. Following significant changes in the tax regulation, the popularity of MET in Latvia has decreased; though, it is still high, especially in the service sector. The micro-enterprise tax shall be retained considering the reduction of administrative and tax burdens; however, it is recommended to introduce a payment for every employee from his/her actual salary in addition to the payment from the enterprise turnover to ensure the tax sustainability and to improve the social security of micro-enterprise (ME) employees. Latvia's experience may be useful also for other countries, especially those with high unemployment and illegal employment rates, to stipulate involvement of the population in legal employment.

International Scientific Conference "New Challenges in Economic and Business Development – 2020: Economic Inequality and Well-Being" : Proceedings

“…Only if the income criterion is exceeded, the additional tax is calculated on the income above the threshold of EUR 720. In any case, however, the tax calculation is very simple but it has several negative aspects that have already been mentioned in previous publications (Leibus, 2012(Leibus, , 2014(Leibus, , 2019.…”

“…Previous studies (Leibus, 2019) show that it is possible to mitigate the negative aspects of MET by introducing an additional object for the MET calculation. Moreover, it is important that all three of the above-mentioned negative aspects may be averted without complicating business accounting and tax calculations of micro businesses.…”

“…Initially, an additional MET payment was offered as a simple solution, similar to the one imposed on the selfemployed persons in Latvia -5% for the pension insurance and 1% for health insurance of employees. The MET payment could be calculated from an employee's income and paid by the employer (Leibus, 2019). The administrative burden would increase neither for the taxpayer nor the tax administration in such a situation.…”

Social Entrepreneurship and Employment Challenges of Persons With Mental Disabilities

“…The MET regime shall be maintained as it provides a significant reduction of administrative burden, is predictable, simple and understandable for small businesses. However, it is recommended to reduce the payment, which is being calculated based on the company turnover and to introduce an additional payment for each employee from his/her actual income in order to ensure the sustainability of the MET regime, to expand its applicability to small businesses in various sectors and to improve the social insurance of ME employees (Leibus, 2019).…”

Estimation of the Imperative of Rural Area Development on Panel Data in the Process of Managing Agricultural Holdings in Poland

“…The authors equated this efficacy with rationality [63][64][65][66] of expectations of those managing agricultural holdings. Thus, the level of this efficacy shows the effectiveness of the process of managing micro-enterprises [67][68][69].…”