Riga, Sept 17 (LETA) - The Latvian Association of Large Cities (LLPA) calls on Finance Minister Arvils Aseradens (New Unity) to maintain the previously reached agreements on the compensation of the proportion of personal income tax revenues, Maija Dulle-Sunina, media relations consultant at the LLPA, informed LETA.

The association pointed out that this is one of the main financial instruments for the sustainable functioning of a local government.

During the meeting, the LLPA leaders stressed that the ability of local governments to provide quality services and fulfil the functions assigned to them is becoming increasingly challenging, given the increased fiscal burden and economic challenges in recent years. In addition to their autonomous functions, municipalities are also required to carry out tasks delegated by the state, which are often not adequately funded.

"The stability of the budget of national cities is largely based on the revenue from the personal income tax, but in recent years the increase in this revenue has been minimal," said Normunds Audziss, the association's executive director. At the same time, municipalities are being entrusted with an increasing number of responsibilities, including the performance of functions delegated by the state, which significantly increases both expenditure and the administrative burden.

This poses challenges for the full provision of services to citizens and requires a careful review of budget planning to ensure a balance between the delivery of core functions and the opportunity to invest in sustainable development.

He reminded that in the tax reform, the Finance Ministry committed to compensate the difference between tax revenues by setting a specific amount of funding each year, which municipalities count on when planning their budgets.

The municipalities of large cities also highlighted a number of strategic challenges that will determine the pace and quality of their development in the coming years. Demographic indicators show a declining population, the need for affordable housing is increasing significantly, and civil protection and security infrastructure needs to be strengthened, especially in the light of the volatile geopolitical situation.

The organization stressed that at the same time, municipalities need to be able to attract investment, foster a business environment and ensure sustainable growth - all of which require a stable and predictable funding base. The current situation clearly demonstrates the need for a sound, municipality-friendly fiscal policy that would not only ensure the performance of basic functions, but also move towards long-term development objectives.

The discussions also highlighted the need to review the system of equalization of municipal finances in order to ensure a fair and balanced distribution of resources among all municipalities.

The LLPA stressed that the financial equalization mechanism should promote equal opportunities for development in all regions, while also taking into account the development potential of large cities.

As reported, the members of the LLPA are ten largest cities of Latvia - Daugavpils, Jelgava, Jurmala, Liepaja, Rezekne, Riga, Ventspils, as well as municipalities of Valmiera, Jekabpils and Ogre.