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Sunday 24.06.2018 | Name days: Jānis

Finance Minister: lower VAT rates for basic goods – effective only for half-year

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Minister of Finance Andris Vilks

The issue with lower value added tax (VAT) rates for basic food products is that it is very difficult to administer, the Minister of Finance Andris Vilks indicates to LNT broadcast 900 sekundes.

Administration problems appear at the point when the basic goods have to be defined, for instance, the type of bread, as there are different kinds of bread, says Vilks, adding that the European Union (EU) is still struggling with this administrative section.

To his mind, lower rates for essential goods are possible in developed, large countries like Germany, Poland, but not in the Baltic States. Latvia is a small country and is not able to control its prices; therefore, such introduction of reduced rates would give an effect only for three to six months, Vilks claims.

Overall, it will be possible to assess next year’s economic results in the second half of 2011. As concerns the tax raise, it will be difficult to avoid it, affirms the Minister, noting the tax increase should be applied next year, and not in 2012.

Vilks believes there is no evidence that consumption could reduce due to the tax policy. In recent months it was up by 6%, and next year with the overall economic background improving, this trend will continue.

The situation in labour market has become more positive, and the unemployment rates, as well as job positions could increase next spring, Vilks concedes. Similarly, the situation in the eurozone is calming down and the domestic market consumption begins to recover.

Moreover, the Minister of Finance points out forecasts for Latvia are relatively conservative, foreseeing that tax revenues next year will be over exceeded.

The bulk of reforms, which the government is carrying out, could be considered as long-term activities. Vilks indicates the government also aims to reach certain progress regarding education and health care.

Regarding the reduction of contributions to the 2nd Tier pension scheme –payments will be returned to their previous level as soon as the budget is settled. Vilks mentions there are constant talks with social partners; however, the requirement profile is wide and diverse. There are different requirements for business and employers and the government has to balance them.

The Minister disagrees that raising the minimum wage is not topical at the moment, because in this way employees’ salaries will attain the sum that is actually received.

Vilks also highlights that there will be no government resignation, as the ministry is open to compromises, colleagues have a very harmonised work, and everyone understands that something has to be reduced, so the solutions are looked for together.

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  1. nmmm says:

    Short-term solutions will not solve the issue.. :(

  2. Kiki says:

    But if the reduced rate would be applied only to basic food?

  3. Hans says:

    Even if reduced rates are effective for only several months, this measure would give some time to maybe consider more options.

  4. Interesanti gan! says:

    Piemēram,Vācijā samazinātā-7% PVN likme ir efektīva kopš tās ieviešanas 1993.gadā!

  5. Murgi! says:

    Ja jau tā būtu,tad pirmām kātrām jau sen tiktu atcelta 0% PVN likme bāzes pārtikas produktiem-Anglijā,Kanādā,Jaunzēlandē,Dienvidāfrikā,Zimbabvē,Dienvidkorejā,Meksikā,Indijā,Bangladešā,Šrilankā,Pakistānā,Afganistānā,Venecuēlā,Kolumbijā,Brazīlijā,Hondurasā,
    Belizā,Kostarikā,Fidži,Gajānā,Montserratā,Tobāgo un Trinidādā,Namībijā,Dominikānā u.t.t.

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