Latvia Reduces VAT on Basic Food Products from July 1: What It Means for Shoppers
Starting July 1, Latvia implements a one-year pilot project reducing VAT on staple foods like bread, milk, poultry, and eggs from 21% to 12%, potentially saving consumers money, though concerns remain about autumn price hikes from other factors.
From July 1, Latvia will launch a one-year pilot project to reduce the value-added tax (VAT) on selected basic food products from 21% to 12%. The reduced rate applies to rye, wheat, mixed flour, and gluten-free bread; fresh, sterilized, or pasteurized cow, sheep, or goat milk; fresh poultry meat (including duck and turkey but not frozen or with added salt over 1%); and fresh eggs in shells. Excluded items include pastries, UHT milk, and condensed milk.
Price calculations follow a specific method: the new price is based on the pre-VAT price. For instance, if a product currently costs €2 (including 21% VAT), its price without VAT is about €1.65. Applying the 12% rate results in a new shelf price of approximately €1.85. The Latvian Food Traders Association estimates that a €50 basket of basic goods will drop to €46.28, saving shoppers €3.72.
Retailers must update price tags and identify affected products. Rimi Latvia states that new prices will appear on receipts and in the "Mans Rimi" app. The company hopes the reduction encourages more frequent purchases of fresh items and supports local producers.
However, savings could be offset by rising costs of fuel, packaging, and fertilizers, influenced by global events in the Middle East. Economists predict a potential food price increase in autumn, but the lower VAT may help cushion the impact. The pilot project is seen as a positive step, with advocates hoping for broader VAT reductions on more food items, aligning with practices in many European countries.
