Riga, Sept 18 (LETA) - While working on the 2026 budget, the government guarantees that local governments' revenues from personal income tax will be ensured in full or 100 percent, as personal income tax is the main source of local governments' revenues, the Finance Ministry told LETA.

The ministry stressed that the financial situation of local governments in 2025 should be assessed as stable. Equalized revenues are growing by more than 10 percent, or EUR 228 million..

Also in 2026, the state budget is expected to fully compensate for the impact of the changes in the labor taxation policy that entered into force at the beginning of this year. Including the expenditure cuts approved by the government on August 26, with unchanged policies, an increase in local government revenues of more than EUR 150 million is forecast for 2026, which will enable local governments to continue their development and provide the services needed by their citizens, the ministry explained.

The ministry explained that this allows the state budget allocation to be adjusted by EUR 58 million in 2026, EUR 62 million in 2027 and EUR 57 million each in 2028 and 2029. Taking into account the changes, local governments are forecast to see a 6.7 percent increase in personal income tax revenues in 2026 and around 5 percent annually in the following years under the same policy, the ministry said.

As reported, 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.