Latvia will reduce VAT on basic food products to 12%.

The Latvian government has decided to reduce the value added tax (VAT) on basic foodstuffs from 21% to 12% for one year, from July this year to June next year.

The lower VAT rate is already applied to local fruit and vegetables in Latvia, but this summer it will be extended to all bread products, milk, eggs and fresh meat, i.e. staple foods. With this measure, the government aims to reduce the cost of consumers' shopping baskets, especially for the goods they need most.

According to Kristel Mets, CEO of „Rimi Estonia“, this is an important decision that could also serve as an example for the Estonian tax system. The VAT cut has also attracted interest in Estonia, especially after the VAT was increased to 24% last summer. In Mets' view, the Latvian government's decision shows that countries can use tax policy to restore price stability and support the population in a way that does not harm market participants.

„Latvia's move proves that countries can make conscious decisions to reduce the price of basic foodstuffs and improve people's quality of life. Earlier, we proposed to the state that basic foodstuffs such as dairy and meat products, as well as fruit and vegetables, should be taxed in Estonia at a rate of 9%. Food is not a luxury, it is a basic need," Mets noted, adding that if the state makes it possible to reduce food prices, the retail sector is ready to pass on these changes to consumers quickly.

In addition to Latvia, several other countries have also introduced reduced VAT rates on basic food products. For example, France, Germany, Hungary, Italy, Romania, Spain, and Croatia have VAT rates on basic foodstuffs of less than 10 per cent.

According to Ms Mets, food price increases in the Baltic countries have been particularly rapid in recent years, resulting in smaller shopping baskets and tighter budgets for the population.