Impact of Taxes on the Budget of Latvia's Households

Government decisions in the field of fiscal policy affect any household. On the one hand, taxes reduce the disposal money of households, their consumption, and savings. On the other hand, households may gain income in the result of redistributing the government budget. The present paper provides a short insight into the basic principles of Latvia's tax system; it assesses, which taxes affect the budget of Latvia's households most. Latvia's tax burden and effective tax rates were analysed, the impact of taxes on households in Latvia, Estonia, and Lithuania, and the average indicators of 27 European Union countries were compared in the present research. The tax burden in Latvia is not relatively heavy, but the proportion of revenues gained from consumption taxes in Latvia in the total tax revenues is significantly higher than in the EU on average. In addition, the proportion of revenues gained from labour taxes is slightly above the EU average level. Such trends in the tax revenues significantly affect the net income of Latvia's households.