The cabinet approved granting the joint-stock liquor producer Latvijas Balzams a corporate tax break of 4.24 million euros to support a large-scale investment project being implemented by the company, which is owned by Amber Beverage Group, in turn owned by Luxembourg-registered SPI Group, which is owned by Russian billionnaire Yuri Shefler.
The unaudited turnover of Latvijas Balzams in the first half of 2017 was 36 million euros, and profits were more than 2.5 million euros during the same period.
It also paid 26.9 million euros to the state budget, (including excise taxes of 21 million euros).
Though the Riga Black Balzams drink after which the company is named is a local phenomenon (and a rite of passage for many visitors), it is best known internationally for making the Stolichnaya and Moskovskaya vodka brands.
The government had to put off the decision to grant the corporate tax rebate several times as National Alliance requested additional information.
Within the framework of the investment project touted by Latvijas balzams, it will expand and modernize its historic manufacturing facilities and warehouses. The project provides for the construction of new facilities as well as the reconstruction of existing buildings.
"Evaluating the interests of the Latvian state during the ten-year period, the main benefits for national economy from the implementation of the investment project would be additional exports (+158 million euros), tax payments (+6.4 million euros) and additional purchases from domestic merchants (at least +20 million euros from which 12.6 million euros would go towards construction investments). It should be emphasized that the implementation of the project, along with a significant increase in productivity, would also ensure the preservation of more than 500 existing jobs and a relatively high wage increase," the company stated.
The total investment to be made is worth 23 million euros.
"It is forecast that in 2023, the project will result in the company's export production amounting to 72.5 million euros, which will be 30.4% more than in 2017, when the investment project will be launched," the company said.
"We are pleased that the government has assessed the importance of investment in the Latvian economy and thus clearly demonstrated its support for the big Latvian producers and exporters," said Intars Geidāns, Chairman of the Board.
JSC ‘Latvijas balzams’ is one of the largest employers and taxpayers in the country – every year the company contributes around 50 million euros to the state budget via taxes paid and, in the case of the project being accepted, there will be an additional 6.4 million euros paid in taxes during the ten-year period. JSC ‘Latvijas balzams’ is the leading alcoholic beverage producer in the Baltic States, which produces more than 100 different brands of beverages. The products are sold in more than 170 export markets through the ‘SPI Group’, as well as in more than 42 markets by direct export of JSC ‘Latvijas balzams’.
In total, almost thirty companies have received corporate tax breaks since 2012 over their investment projects. These companies include Dobeles Dzirnavnieks, Baltic Crystal, Tervetes AL, AKG Thermotechnik Lettland, Olainfarm, Latvijas mobilais Telefons, Latvijas Finieris, Bite Latvija, Cross Timber Systems, Livonia Print, Plantos, Rigas Piena Kombinats, Aduga, Alfa Agro, Rigas Elektromasinbuves Rupnica, Valmieras Stikla Skiedra and others.
According to the Economics Ministry's data, the total amount of investment projects implemented since such projects became eligible for corporate tax breaks is EUR 355.1 million, while the total amount of tax breaks - to EUR 79 million. The investment projects have created more than 1,200 new jobs in total.