On November 9, Saeima’s Budget and Finance Committee rejected the proposals submitted by the opposition politicians on reduction of VAT not just in general, but for multiple industries affected by COVID-19 crisis.
The proposals in question were submitted for amendments to the Value Added Tax Law, already included in the state budget legislative draft for 2021.
On behalf of Harmony political party, Saeima member Valerijs Agesins proposed reducing VAT to 18% for one year in order to stimulate consumption and provide support for the economy impacted by the pandemic.
“We believe such a tax reduction would help at least somewhat reduce companies’ costs and prices for goods of first necessity. This measure would help people breathe and survive,” the politician believes.
MP Igors Pimenovs stressed that the crisis offered an opportunity to discuss tax reduction, as this topic had loomed in the horizon for a long time.
“Price reduction would not only increase sales but also motivate producers,” explains Pimenovs.
The committee also declined politician Vjaceslavs Dombrovskis’ proposal to apply reduced tax rate of 5% for accommodation services at tourist accommodations. The politician explained it would help the industry recover from COVID-19 pandemic.
“It would be a good gesture of us considering the industry important, demonstrating our preparedness to make the steps to support them,” said the deputy.
Saeima also rejected the proposal from the Union of Greens and Farmers to establish a reduced tax rate of 12% for public catering services for three years. Politician Dana Reizniece-Ozola stressed that this measure would be modest. At the same time, she criticized the government for restricting this industry and failing to explain support mechanisms properly.
“What is being done now is aimed at destroying small and medium-sized businesses,” says Reizniece-Ozola.
ZZS also proposed establishing reduced tax rate of 5% for supplies of certain food products – sour milk products without additives, milk, fresh or chilled meat and fish and eggs in shell.
Dombrovskis said that looking at the situation in the government, where, he believed, there had been no clarity on anti-COVID-19 measures, he had concerns if the country even had an economy preservation strategy for the pandemic.
“What will the public catering service sector do during the state of emergency? I haven’t a clue,” said the politician, stressing, that giving public catering sector reduced 5% VAT would offer the industry an option to survive.
Dombrovskis also invited coalition partners to learn from their own mistakes committed in spring, when refusal to support opposition politicians’ proposals on support of sectors affected by COVID-19 reduced in a decline for growth output.
Pimenovs stressed that he would have liked a quality discussion in the Saeima, not a formal rejection of the proposal.
Reizniece-Ozola stressed that businessmen who were affected by the government’s decision to declare a state of emergency should have a clear understanding how and when they could expect support.
Another proposal from ZZS – to reduce VAT to 5% for book publishing – was also rejected.
These and other proposals from the opposition were rejected by the committee without explanations. Multiple opposition members said they were unhappy with this practice. (BNN/Business World Magazine)