Excise duties on most goods in Latvia will remain lower than those in Estonia even after hikes Estonia’s southern neighbor plans to put in place over the next three years, “Aktuaalne kaamera” reports.
Latvia has no current plans to raise VAT, unlike Estonia, which increased that indirect tax by 2% at the start of this year, with a rise of the same proportion to come into effect in the start of 2025.
This will make Latvia’s VAT rate 21%, compared with 24% in Estonia.
The lower VAT rate, of 12%, on fruits and vegetables will remain in effect in Latvia too.
While the lower rate on fruit and vegetables will cost the Latvian government EUR 17 million next year, “Aktuaalne kaamera” reports, maintaining farmers’ competitiveness there is seen as more important.
On the other hand, hikes will be in place on that commodity, which has in the past attracted cross-border custom – alcohol.
Latvia has long had a plan in place to hike alcohol excise taxes in the coming years, and the rate set to increase incrementally for three years, starting on March 1 next year.
The change will put excise at EUR 9.80 per hectoliter for each percentage point of pure alcohol by volume, to start off with.
According to the Latvian Ministry of Finance’s calculations, until 2027, the excise duty could boost the price of a half-liter bottle of beer by 2 cents.
Latvia is also to hike fuel, tobacco and gambling taxes. Non-alcoholic sugary beverages will become more expensive, at an average increase of 4 cents per liter (Estonia has scrapped a planned sugary drinks tax).
Of other impending tax hikes, Latvian Minister of Finance Arvils Aseradens said: “We will also end the excise exemption on petroleum products used in electricity generation and heating. We will be raising the vehicle usage fee and the tax on company cars.”
The vehicle usage fee in Latvia is to increase by 10% next year.
While there are concerns in Estonia that the tax and excise differences between the two countries could encourage cross-border shopping trips to Latvia – as has happened in recent years when there has been a significant disparity in excise duties, for instance on alcohol – Latvian authorities themselves have said the impact of Estonian cross-border trade on total tax revenue is a non-factor in any case.
Final decisions are still pending, as Latvia’s 2025 state budget is expected to reach the Saeima, the Latvian parliament, in a few weeks’ time.
“Given the scope of tax changes and the number of documents required to amend laws, including updates to personal income tax, we need additional time at the Saeima to review everything,” Latvian parliamentary speaker Daiga Mierina said. (ERR)