KPMG on Baltic Ports, the Riga Free Port and SEZ

KPMG has finally completed its study on Baltic ports. As might have been expected, in Riga revenue per employee stands at EUR 128 thousand, while in Tallinn - EUR 264 thousand. On the other hand, the average salary at the Riga Free Port administration is EUR 2,138, compared to EUR 1,645 in Tallinn. Total port revenues also differ. While in Riga they amount to only EUR 46.4 million, in Tallinn the figure is EUR 88.6 million.

Of note was the fact that the Riga Free Port has a Special Economic Zone (SEZ), meaning that companies with that status enjoy an 80% discount on real estate tax. Discounts are also available on income tax, while dividends transferred to companies registered in offshore jurisdictions are taxed at 0%. Although such concessions were originally set to expire in 2017, on 4 April 2013 the government of V. Dombrovskis decided to extend this period to 2035, justifying the decision on the grounds that - due to the economic crisis - 17 companies registered in the Riga Free Port, 36 in Liepāja, and 27 in the Ventspils Free Port had not sufficiently benefited from SEZ advantages.

Equally interesting information can be found in the Information Report prepared by the Ministry of Economics, "On the Operation of Free Ports and Special Economic Zones in 2011 and the First Half of 2012." Also operating in the Special Economic Zone is Sarkandaugava's biggest stinker (the oil fumes from which are noticeable both when driving towards Vecmīlgrāvis and at the Ozo Golf Club) - B.L.B Baltijas Termināls. At the start of 2012 the company employed 167 workers (for comparison: SIA Naftimpeks - 76, SIA Baltijas Container Terminal - 207). Although the number of employees at SEZ companies grew by almost 100 over the year, the average salary in 2012 was LVL 519 (take-home - LVL 360), which incidentally is LVL 40 less than the previous year.

While the total number of people employed at the Riga Free Port is approximately 5,000, the SEZ employs roughly one fifth of these - 1,101. By comparison, the Ventspils Free Port SEZ has 31 companies operating within it, employing 2,466 workers, with an average gross salary of LVL 683.26 (take-home - LVL 473).

The calculated real estate tax on buildings and structures in 2012 was LVL 159,826; the applied discount - LVL 126,840; actually paid - LVL 32,986, or 80% relief.

An interesting fact: in Mežaparks - which also receives the stench from the port's oil terminals - there are approximately 400 households, each paying around LVL 1,500 per year in real estate tax, totalling approximately LVL 600,000. The Riga City Council may apply a tax relief of 25–90% for low-income and other socially vulnerable persons; there is no information on how many have had such relief applied.

Sources:

[1] KPMG. Competitive Position of the Baltic States Ports - http://www.kpmg.com/LV/lv/IssuesAndInsights/ArticlesPublications/PresesRelizes/Documents/Competitive-Position-of-the-Baltic-States-Ports.pdf

[2] Ministry of Economics. On the Operation of Free Ports and Special Economic Zones in 2011 and the First Half of 2012 - http://www.em.gov.lv/images/modules/items/EMZino_031212_SEZ_m%C4%81jas_lapai.doc