One percentage point VAT cut gave traders 50 million lats (90.9 million dollars), says Karlis Ketners, Riga Technical University professor.

“It was useless. It is another tax policy axiom – prices are flexible, when we raise taxes, but absolutely inflexible when we reduce them. We just saw it in practice,” he told Deloviji vesti.

In his opinion, the amount could have been redistributed in a more efficient manner, for example, by increasing the non-taxable basic allowance.

The professor blames lack of a national strategy for tax policy.

“It is all because there are no particular goals. Sadly, we keep driving from one ditch into another.”

As reported, Latvian Prime Minister Valdis Dombrovskis believes that the Value Added Tax (VAT) cut was an effective measure for decreasing inflation tendencies.

Still, he admits that the bold step is not fully reflected in current prices.

“Price reduction is partially achieved. Unfortunately not at the scale it was planned. Some traders and producers used VAT reduction as an opportunity to compensate for growing costs,” he says.

Ref: 102.105.105.2081