RIGA, July 24 (Xinhua) -- Crisis is the right time to cut labor taxes, as it would help boost international competitiveness and return the jobless to the labor market faster, a Bank of Latvia official said on public radio on Friday.

Uldis Rutkaste, who heads the Latvian central bank's monetary policy department, noted that Latvian labor taxes are comparatively high -- above the OECD (the Organization for Economic Cooperation and Development) average and higher than neighboring Lithuania and Estonia.

"This means that for our companies, employees cost more than for many of our competitors. It would therefore make sense to lower the taxes on labor, shifting the burden to other tax categories," the official said.

In Latvia, the main labor taxes include personal income tax and state social security contributions, or social tax.

Rutkaste proposed reducing the burden of labor taxes by lowering the social tax rate, shifting part of social expenditure to the central government's or local governments' budgets.

To compensate for the resulting loss of budget income, the Bank of Latvia suggests raising consumer taxes like value-added tax (VAT), said the official.

According to the European Commission's Summer 2020 Economic Forecast released earlier this month, the Latvian economy, being affected by the ongoing coronavirus pandemic, will contract by 7 percent this year and rebound by 6.4 percent next year.

In March, Bank of Latvia projected that the Baltic country's gross domestic product is likely to shrink by 6.5 percent this year. Enditem

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