The Ministry of Agriculture (MoA), representatives of farmers ‘and traders’ organizations have repeatedly asked the government to set a 5% reduced value added tax (VAT) for food products, on Friday after the discussion held by the MoA “Reduce VAT for alimony. YES NO? ” its members agreed.
Jānis Eglīts, head of the Ministry of Interior’s office, stressed that reduced VAT for food in the European Union (EU) has not yet been implemented only in Latvia, Lithuania, Estonia, Bulgaria and Denmark. Other countries, on the other hand, have recognized reduced VAT as a good anti-inflationary measure.
Additionally, Eglits drew attention to the fact that the poorest part of society suffers the most from high food prices, spending 36% or more of their monthly income on food. Similarly, food expenses depend on how many people there are in the family, and even in this case, families with children will have higher expenses.
At the same time, Eglits admitted that by reducing VAT on food, one cannot hope for a decrease in food prices under these circumstances, but it would not grow as fast as with 21% VAT.
Eglīts also recalled that the VAT reduction for fruit and vegetables has achieved its goal: the prices of fruit and vegetables in Latvia fell by 11.7 percentage points compared to Lithuania and Estonia. The industry average salary increased by 37%, the number of registered VAT payers also increased by 9%, and the value of transactions subject to 5% VAT increased by 30%. The tax revenue from the fruit and vegetable trade increased by 29%.
The reduced VAT rate for fresh fruit and vegetables is also positively evaluated by the chairman of the board of directors of SIA “Very Berry” Gundega Saushkina. He points out that thanks to the 5% VAT, the shadow economy in the sector has decreased, legal trade has increased and sellers have begun to indicate the country of origin of the products more honestly.
Noris Krūzītis, executive director of the Latvian Food Traders Association, stressed in the discussion that VAT reduction is an internal market tool, which is bearing fruit. The reduction in VAT on fruit and vegetables has created stable local partners for traders, which has made it possible to reduce Polish imports. At the moment, Latvian traders practically do not sell fresh meat of Latvian origin, but the VAT reduction will eventually also allow stable local partners to emerge for this product, Krūzītis said.
Furthermore, Krūzītis stressed that VAT is a tool that can be both reduced and increased. “If nothing is done with VAT, the quantity of goods of Latvian origin on store shelves will decrease and, in the event of a crisis, it will become even smaller,” said Krūzītis.
Responding to the criticism that the VAT reduction would only benefit the trader, the President of the Cooperation Council of the Cooperation Council of Agricultural Organizations (LOSP) Guntis Gūtmanis recalled that when introducing a 5% VAT rate for fruit and vegetables, traders and producers concluded an agreement on the fair introduction of VAT, which allowed industry representatives to assess the real impact of the reduced VAT rate on both the producer and the trader.
The rector of the Latvian University of Biosciences and Technologies (LBTU), Irina Pilvere, said that the reduced VAT rate for fresh meat, fresh fish, eggs and dairy products could increase the purchasing power of Latvian citizens, who it is one of the lowest in the EUROPEAN UNION.
Jānis Šolks, chairman of the board of directors of Latvian Dairy Farmers’ Central Union (LPCS), further said that the reduction in VAT would increase turnover, which would give producers, who are currently working in liquidation mode, the opportunity. to realize the volume of products necessary to continue the economic activity.
–
