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Solidarity tax norm recognized as non-compliant with Latvia’s Constitution

Photo: flickr.com.
On Thursday, 19 October, the Constitutional Court of the Republic of Latvia declared the Solidarity tax norm as non-compliant with the country’s Constitution.

The Constitutional Court declared that Section 6 of the Solidarity Tax, which establishes the tax rate, does not comply with the principle of equality and therefore violates Section 91 if the Constitution. This section will be abolished on 1 January 2019 to give the government time to develop an alternative solution to avoid creating problems for the state budget.

Reading the verdict, the court concluded that the Solidarity Tax is a new method for acquiring revenue, which means it cannot be defined as a social insurance fee.

The Constitutional Court also noted that the Solidarity Tax was approved correctly, in accordance with Saeima’s internal order. Partners and experts were also involved in the development and approval process. With that, there is no reason to believe the law was hastily approved.

The Constitutional Court emphasizes that any law has the idea of solidarity behind it. Payment of taxes allows the individual to improve society’s welfare.

The ruling of the Constitutional Court is final and not subject to appeal.

The Solidarity Tax Law came into force in January 2016. Solidarity tax is applied to employees’ wages that exceed the state social insurance fee threshold.

Adoption of this law made it clear that the goal of this law is reducing regression for employees, self-employed with high income level, and secure revenue for the state budget to help finance effort to reduce social protection and inequality.

Business organizations have proposed cancelling the solidarity tax. Multiple companies and employers decided to appeal the solidarity tax in the Constitutional Court, which commenced several cases to assess compliance of the law with the Constitution.


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