RIGA, Oct 3 (LETA) - The Government has agreed to increase the proportion of the personal income tax revenue for local governments from 75 percent to 78 percent, reducing the state's share from 25 percent to 22 percent, Prime Minister Evika Silina (New Unity) said today at a meeting of the Latvian Association of Local and Regional Governments.

However, the municipalities demanded that the former distribution ratio of the personal income tax be restored: 80 percent for municipalities and 20 percent for the state.

Silina explained that it is possible to agree that there is progress towards an 80 percent share of the municipalities' share of the tax revenue, but she cannot promise that this will be achieved.

The Prime Minister also listed a number of compromises that the government has agreed to, such as not taking the surplus of the personal income tax away from the municipalities, but allowing the municipalities to use these funds to pay off loans, allowing them to choose which loans the municipality will cover. This would allow municipalities to free up some of their funds.

An additional EUR 2.5 million will be allocated to border municipalities - Aluksne, Augsdaugava, Balvi, Ludza and Kraslava - because it is difficult for these municipalities to develop when they live next to an "iron curtain".

It is also planned not to apply a service charge to municipalities for new loans.