New Agriculture Minister plans to fight for reduced VAT on food

Agriculture Minister Armands Krauze (Union of Greens and Farmers) promises to fight for the reduced value-added tax (VAT) rate not only for fruit and vegetables, which will be reimposed at the full 21% rate next year after five years of a reduced rate, but also for other foods, Krauze told Latvian Television October 9.

Krauze told LTV's newscast “Morning Panorama” that during the previous government, ministries were advancing their priorities, and after the government's approval on September 15, he was “put in front of the fact” that the 5% VAT rate on fruit and vegetables was no longer budgeted for next year.

“Then I would have to fight not to keep [the reduced rate] but to redefine it anew,” Krauze said.

He said the reduced VAT rate on fruit and vegetables and other food products is a goal he will also talk about in the Working Group on tax changes, it will be a priority for him and the ZZS.

But the tax change group plans to complete its work next year, so it could be introduced “at the earliest in 2025,” according to Krauze.

The reduced VAT rate of 5% instead of 21% for fresh vegetables, berries, and fruit was introduced for the duration of the pilot project in 2018.

The Ministry of Agriculture (ZM) concluded that the project was successful, but the Ministry of Finance considered that it was not successful and that the calculations of the ZM regarding positive impact had been misinterpreted. However, the government agreed to keep the reduced VAT until 2023.

When creating the next year's budget, it is no longer planned to maintain the reduced VAT rate for fruits and vegetables characteristic of Latvia. An additional EUR 3 million has been agreed to help fruit and vegetable producers to invest in competitiveness and export capacity.

In a statement to the media, the society “Latvian Association of Fruit and Vegetable Traders” called the decision a “spat in the face” for local farmers, consumers of local produce, as well as merchants “who have long struggled with shadow economy-supporting competitors.”

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