As in other Baltic countries, government presence is not prevalent in the economy. Total government expenditure stands at 37% of GDP. Government expenses that exploded during the recession, reaching even 43.4% of GDP, were put under containment via successful fiscal consolidation package, including curbing wage bills and retirement benefits. This austerity program supported by the IMF put the government finances again in order lowering high deficit from 7.3% in 2010 to just 1.4% of GDP in 2014. Economy restructuring resulted in a robust economic growth. However, the projected growth was undermined by weak performance in the Eurozone which is Latvia’s main trade partner, by geopolitical tensions in Eastern Europe which may have discouraged investments, and by the problems associated with
the Liepavasmetalurgs steel mill. The mill that went bankrupt was acquired by the Ukrainian KVV Group company in 2014, which, however, decided to close down the site in May 2015. The guaranteed debt paid by the government for the old mill remains as an unsettled issue, while future developments are uncertain. Transfers and subsidies remain high, although they decreased by cuts in the level of guaranteed minimum income. State owned companies in Latvia are mostly concentrated in the utility and transportation sector, but still comprise a large share of the economy. Efficiency of their managerial practices is under question. Taxes on corporate income are low, at 15%, while VAT levels are 21% and 12% (preferential rate). However, the overall tax wedge is high (44%), due to high social contributions (11% of the gross wage on behalf of the employee and 24% on behalf of the employer) and to - flat - personal income tax of 24%, which was decreased by 1 percent as compared to the previous year.