State might lift reduced tax for OTC drugs

The reduced value-added tax (VAT) rate of 12% for over-the-counter medicines could be lifted, meaning the regular VAT rate of 21% would apply to these drugs, says a Finance Ministry proposal for the 2017 budget, reported Latvian Radio Monday.

On Tuesday the government will start work on the next year's budget plan. The idea to lift the reduced tax reportedly came after a suggestion by World Bank experts.

"According to discussions with the Health Ministry and World Bank experts, a suggestion, still in its early stages, has been prepared - to apply the standard rate, not a reduced rate of the value-added tax to over-the-counter medicines," said Finance Ministry Representative Aleksis Jarockis.

Jarockis however said that the initiative will be supported only if okayed by the Health Ministry.

While the Health Ministry already voices skepticism over the initiative.

"Residents' expenses on medicines will increase. Over-the-counter drugs are often the first ones people use when feeling symptoms of a disease," said Health Ministry representative Oskars Šneiders.

Šneiders also claimed that low-income patients might be forced to skip using medicines, further turning their health for the worse.

Latvia's Finance Minister Dana Reizniece-Ozola is to discuss the initiative Monday with the Latvian Federation of Employers, the Chamber of Commerce and Industry, and labor union representatives.

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