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The evolution of tax and benefit policy in Latvia: what has been the place of distributional considerations?

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Listed:
  • Anna Zasova

    (Baltic International Centre for Economic Policy Studies (BICEPS))

  • Marija Krūmiņa

    (Baltic International Centre for Economic Policy Studies (BICEPS))

  • Olga Rastrigina

    (Institute for Social & Economic Research (University of Essex))

Abstract

Latvia has one of the highest levels of income inequality and poverty in the EU. In this article, we argue that distributional considerations, especially assistance for those really in need, have had a low priority in designing tax and benefit policy in Latvia. We estimate the distributional impact of budget austerity measures that were implemented in 2008-2012 under the programme with the international lenders and show that the impact was progressive. At the same time, we argue that many of the reforms implemented in response to the crisis had been called for much earlier, thus in a way these anti-crisis measures were simply correcting previous policy failures. We argue that the international lenders played a major role in defining the direction of the reforms and ensuring protection of the poorest population groups. We estimate that some major reforms implemented by the government after completion of the programme with the international lenders, will have a regressive impact, despite earlier government commitments and lenders’ recommendations.

Suggested Citation

  • Anna Zasova & Marija Krūmiņa & Olga Rastrigina, 2012. "The evolution of tax and benefit policy in Latvia: what has been the place of distributional considerations?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 12(2), pages 5-16, December.
    • Handle: RePEc:bic:journl:v:12:y:2012:i:2:p:5-16
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    References listed on IDEAS

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    1. Leventi, Chrysa & Figari, Francesco & Paulus, Alari & Avram, Silvia & Matsaganis, Manos & Navicke, Jekaterina & Rastrigina, Olga & Sutherland, Holly & Militaru, Eva & Levy, Horacio, 2013. "The distributional effects of fiscal consolidation in nine EU countries," EUROMOD Working Papers EM2/13, EUROMOD at the Institute for Social and Economic Research.
    2. Alf Vanags, 2010. "Tax reform in Latvia: Could it be fair?," SSE Riga/BICEPS Occasional Papers 8, Baltic International Centre for Economic Policy Studies (BICEPS);Stockholm School of Economics in Riga (SSE Riga).
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