Minister warns Latvia will have to raise excise tax because of 12% VAT rate for fruits and vegetables

In order to adopt a 12% VAT rate for fruits and vegetables in Latvia next year, it will be necessary to find an additional EUR 16 million in the state budget. This amount could be achieved from a rapid inflation of excise tax, says Latvian Minister of Finance Arvils Ašeradens.
Representatives of agricultural organisations – during their meeting with Prime Minister Evika Siliņa, Ašeradens and Ministry of Finance officials – categorically rejected the government’s “compromise variant” to increase VAT on vegetables, fruits and berries to 12%. The Farmers Saeima stresses in its press-release that the meeting was not attended by a representative of the Ministry of Agriculture.
As previously reported, on the 22nd of November, the Saeima New Unity faction expelled Andrejs Ceļapīters from its ranks. He was in favour of maintaining VAT at 5% for fruits and vegetables.
Valdis Dombrovskis, Executive Vice-President of the European Commission, meanwhile criticises the rapid rise of expenditures in Latvian government’s budget project for 2024, saying that they exceed than what is recommended by the European Commission. He also said that Latvia’s projected budget deficit volume is above the desired level – 3% of GDP. Dombrovskis also said that he may have been harsher in his talks with fellow party members than he was in public comments.
This indicates that once again budget approval in the Saeima went under high tension.
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The existing 5% VAT rate for fruits and vegetables will remain in force until the 31st of December 2023. From 1st of January 2024 onward it is planned to return to 21%. In order to afford a reduced 12% VAT rate from the 1st of January onward, the budget will need to allocate EUR 16 million, as previously announced by Prime Minister Evika Siliņa.
Ašeradens said he sees no budget reserves, and, considering the budget preparation process, there is very little room to manoeuvrer. Additionally, previously businessmen were promised there would be no significant increase of taxes next year.
This is why the only way to find the necessary EUR 16 million, according to Ašeradens, is the rapid raising of excise tax rates. The budget project already provides for raising tax rates

in order to equalise them with other Baltic States.

One option for compensatory mechanisms is increasing the excise tax for non-alcoholic beverages with sugar concentration up to 8 g per 100 ml by 10.8%. On top of that, it is proposed to raise the excise tax rate for alcoholic beverages with sugar concentration above 8 g per 100 ml and energy drinks by 19.3%. This could help secure the budget EUR 1.681 million.
The Minister of Finance sent this and other planned compensatory mechanisms to the prime minister and coalition partners. It is planned for them to be reviewed at the next week’s meeting of the government.
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Farmers Saeima board member Mārtiņš Trons comments on the meeting with the prime minister and minister of finance: “Unfortunately, the Ministry of Agriculture

sent only a place card bearing the name of the ministry’s state secretary to the meeting.

Although after many invitations to meet with us, E.Siliņa and A.Ašerādens finally made the time to meet with us, we have to admit that none of the participants of the meeting were prepared or wanted to listen and talk with us. It is because of this the compromise we see at the moment is the government’s proposed 12% VAT for vegetables, fruits and berries in 2024.”
Also read: EU Commissioner: Latvia’s planned expenditures growth is more rapid than EC’s recommended
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