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Sunday 23.10.2016 | Name days: Daina, Dainida, Dainis

Producer: new excise tax on food products may leave the poor without sausages

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUWe need to carefully review the range of food products on which Healthcare Ministry plans to apply its new excise tax. This is because it could potentially impact poor residents of Latvia, believes Board member of Forevers meat processing company Andrei Zhdan.

«Multiple countries of Eurozone had tried adding taxes on specific food products and ingredients over the past several years, including sweets, drinks, sugar, fats and salt. Factors tied to public health served as the foundation for those initiatives. Whether or not initiatives were successful remains unknown.

The goal of such an initiative in Latvia is not the improvement of public health, but rather the increase of budget revenue. Excise tax of this kind is nothing more than an additional hidden tax. It will most definitely impact people’s shopping habits and the business sector in general. It will most likely reduce demand and shake up economic indexes of producers. Producers will be forced to increase producer prices due to new administrative expenses. The state will most likely have to create a new structure to administer this tax. In the end, it is the buyer who will pay for everything,» – says the entrepreneur.

According to him, the research ordered by the European Commission on the influence of taxes on food products in 2014 states that such taxes more often than not increase prices on some products and force consumers turn to cheaper products of lower quality.

«Adoption of excise tax on food products like sausages will have a large impact on poor consumers. The consumer basket will either become even emptier or will include cheaper products of lower quality. Food costs per capita in Latvia are already higher than costs in countries like Germany and USA,» – adds Zhdan.

He mentioned Denmark, which adopted a similar tax on meat and dairy products in 2011. This tax applied to producers whose annual revenue for specific products exceeded DKK 50,000. This tax also applied to imports. This legislative initiative was finally lifted in 2013 because people in Denmark had noticed that prices on certain products had risen dramatically, which was followed by a decline in demand for them.


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