LABOUR TAX BURDEN AND WELFARE OF THE POPULATION IN LATVIA

In the time of open borders in the European Union, Western European countries, especially Germany, have become a popular destination for emigrants from Latvia. Salary and social contributions as well social guarantees that are mostly higher there than in Latvia are mentioned as the main arguments for this choice. The research highlights a detailed comparison of the labour tax burden on employees between Latvia and Germany. The theoretical framework for the research is based on the analysis of the national laws and other empirical research and statistical data. The hypothesis determines that the tax burden on employees receiving small and medium salaries in Latvia is significantly higher than in Germany, so having a negative impact on the welfare of population. The research employs quantitative and qualitative research methods, monographic method, cross-country comparison, mathematical statistical methods and analysis method. The results support the research hypothesis and allow to conclude that the labour tax burden on small and medium wage earners in Latvia is higher than in Germany. In order to increase the welfare of population in Latvia, it would be necessary for the governmental institutions to consider the possibility to increase the non-taxable minimum up to the level of the minimum salary and to restructure the MSSIC and PIT by promoting a long-term motivating tax model for employees.