Latvia mulling additional banking profits tax

A Swedbank office in Riga.
A Swedbank office in Riga. Source: SCANPIX/REUTERS/Ints Kalnins

Commercial banks in Latvia may have to part with the lion's share of what they make in the form of taxes in the future as soaring profits see politicians weighing a special tax.

Banks active in Latvia made almost €336 million in the first six months of this year, which is more than the sector generated in profit for the whole of 2022. The country's finance ministry said that recent talks for altered loan conditions have failed to produce results, which is why a different approach is needed. ECB rate hikes are one reason banks are seeing record profits.

President Edgar Rinkevics also picked up on the Bank of Latvia's calculations regarding banking profits and summoned Finance Minister Arvilas Asheradena for a meeting, LSM reports. Rinkevics said he expects action to be taken regarding loan conditions offered to current and future clients of banks.

An agreement could be reached on Wednesday after a scheduled meeting of a working group on taxation. One of the options being weighed by the group is taxing banks' additional profits following the example of Lithuania. But the Latvian central bank holds Estonia's approach to be more competitive, which would require broader changes in corporate taxation.

Santa Purgaile, vice president of the Bank of Latvia, said that while commercial banks in Latvia could be taxed more, it would motivate them to pay more dividends. Taxing major profits would also do nothing to alter the monthly loan payments made by Latvian residents. Asheradena has said that the government cannot go between banks and their customers.


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Editor: Marcus Turovski

Source: LSM

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