The reduced 5% rate for fresh fruits, berries and vegetables should be maintained next year as well, and the Value Added Tax Law should be expanded with this as a separate regulation, according to the report from the Ministry of Agriculture.
Latvian Association of Agricultural Cooperatives (LLKA) director general Rolands Feldmanis said he is happy to see the ministry support the preservation of reduced VAT rate.
He stresses it is important because discussions about the high markup in the retail trade network and competition with imported fruits and vegetables still continue.
“Lower VAT creates better competition conditions for our producers because the influence of reduced VAT is not as severe towards import offers. We also hope the reduced rate will motivate people to consumer locally made vegetables,” comments Feldmanis.
The ministry’s report mentions that development indexes of the fruit and vegetable sectors are positive. Indexes show that between 2017 and 2022 these sectors have developed considerably. Both fruit and vegetable farms grew in size (+5%). The quality of products increased as well (+46%), as did export value (+77%).
The report also mentions that in Latvia the fruit and vegetable agriculture sectors grow more rapidly than they do in other EU member states.
According to data available to the minister, the value of fruits and berries produced in Latvia has increased by 100%, putting Latvia in third place behind Luxembourg and Slovenia.
As for the value of vegetables, it has increased by 25% in Latvia, which is above the average among EU member states.
Despite the up in value of locally produced fruits, berries and vegetables, however, there has also been a rise of imported goods.
This means that when looking at the situation in the vegetable and fruit sectors of Latvia’s agriculture since the adoption of reduced VAT for fruits, vegetables and berries, it can be concluded that adoption of a reduced rate has paid for itself because it provided a tangible and positive effect on this sector.
Also read: Food prices would go down fasted if “all chain links” got involved, LPTA argues