Ep.56 Pēteris Strautiņš: Taxes – The Bear of Economic Happiness
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This conversation has long deserved a video version - here it is finally. • I enjoy listening to this conversation with economist Pēteris Strautiņš over and over again - it will hardly get old. • After the conversation with Pēteris, I wanted to go to Latgale, read Marcel Proust's 'In Search of Lost Time' and Pēteris's own book 'Living in Latvia is Interesting' (stories about the economy and travel). • Pēteris's predictions for 2024 seem to have come true in the Latvian economy ('lukewarm'). • Pēteris explains - why the economy in Estonia has fallen, but in Lithuania - has grown, but in Latvia there is an 'eternal psychodrama' (everything is always bad). Often - without reason, because Lithuania grew faster, not us - slower. • Taxes are hardly to blame when comparing the Baltic economies. • Comparing Latvia with the examples of Singapore and Ireland is just populism. • In Latvia, people often tend to believe that external conditions determine their fate. • In the tax system, it is more important to prevent factors that are harmful to business. • Why does one city in Latvia develop well with an identical tax system, while another does not? • The Ministry of Finance has already implemented Pēteris' idea of abolishing the differentiated non-taxable minimum for PIT. • Another idea is to automate the increase in excise duty on tobacco and alcohol. • The story about PIT redistribution only applies to some municipalities in the Pierīga region. Municipalities are already interested in attracting investments. • Latvia's CIT is like selling cheap entrance tickets to a disco with efforts to make money on selling more expensive drinks afterwards. • The SRS and banks are such large organizations that someone will always be dissatisfied with something. Emotionally, it is easier for people if there is an external villain. Moreover, such organizations have limited opportunities to respond. • In the economy, we already do +/- everything. What should be measured, why tax changes should or should not be made? • Cash makes the shadow economy possible in general. • From publicly available statistics, it is wonderful to see when companies are moving out of the shadow economy – if turnover grows slightly, compared to the rapid growth of social security contributions. • The main taxes (effective rate) have rather gone down over time, collectability improved, the shadow economy decreased. • “I don’t pay taxes because I don’t trust the state.” Then researchers can detect it and make it public, but maybe people are simply looking for an excuse for their actions?
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