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The regulation adopted by the Latvian Parliament promotes investor-unfriendly environment

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The regulation adopted by the Latvian Parliament promotes investor-unfriendly environment

june 30, 2016 / News

““Ventspils nafta” terminals” Ltd (VNT) does not support the amendments to the law "On the Application of Taxes in Free Ports and Special Economic Zones" (hereinafter – Amendments) adopted by the Latvian Parliament on 16 June.

The Amendments grant municipalities the rights to administer the real estate tax relief to licensed companies operating in the territory of the free port zones at their sole discretion, i.e. by applying subjective criteria not specified by law. Furthermore, the Amendments do not exclude the possibility that local authorities interfere with already existing investment agreements, attempting to reduce the extent of real estate tax reliefs already granted and being an integral part of the investment agreements in force. VNT considers that those Amendments will not promote business development in municipal territories but rather create an unpredictable, inconsistent, and unfavourable environment for investments in Latvia.

VNT Managing Director Lars Pantzlaff points out: “The administration of tax reliefs should be managed by the state as a strategic tool and not by local authorities based on subjective grounds. I believe it is in the interest of Latvia to maintain a good reputation in the eyes of existing and potential investors.  This is then also aligned with the government’s aim to promote a business-friendly environment.”

The legislative process regarding the Amendments appears rushed, as the potential impact was not thoroughly assessed and no opinion with respect potential effects was received from affected influential businesses. Such does not contribute to the image of Latvia to attract investors to enhance its economy.

The example used when promoting the Amendments in parliament is also rather symbolic as it closely connects to how VNT and its operations are portrayed in the local context of Ventspils – a view that bears no basis and is misleading.

VNT Managing Director Lars Pantzlaff states: “For quite some time VNT is facing a situation where Ventspils City Council and Ventspils Freeport Authority negatively affect the development of the company, i.e. imposing a ban on our permits as long as there is no vapour recovery unit installed. We are well aware of our responsibility towards the environment and we will live up to it. Hence, after having resolved where to place a vapour recovery unit in the port, VNT is now in the execution phase – yet local approvals are either slowly or not forthcoming at all. Given public statements made one does not have to be very creative to figure out that the new law will likely find its first application in Ventspils in connection with VNT.”

A stable and predictable legislative framework, along with the performance of a port, the cost of transportation to a terminal, and the terminal efficiency play a significant role with respect to the ability of VNT to attract product flows and pursue its development in a volatile market.

VNT Managing Director Lars Pantzlaff emphasizes: “VNT shareholders have invested millions of euro into the terminal and entered Latvia in anticipation of providing a predictable, stable, and supportive business environment. If we feel that our investors’ rights are infringed or violated, then we will certainly pursue any available means, both internally in the country and externally, in the context of EU laws and international treaties.”

Central Statistical Bureau (CSB) of Latvia reports a drop of freight transports in all sectors  - international rail freight declined by 21 %, transit freight decreased by 49,5 %, freight to and from Latvian ports declined by 21 %, comparing first quarter 2016 with the same period in 2015. In such circumstances, the Amendments coupled with CSB data adds to concerns about economic predictability and legal certainty for investors like VNT in Latvia overall. Instead, it rather requires a pro-active approach and the support to the companies, as well as mutual cooperation in search for solutions that benefit, businesses, ports, municipalities, and the state.