EU – Baltic States, Financial Services, Latvia, Taxation, Tourism

During the discussions, the international lenders reminded of the memorandum signed by Latvian politicians, increasing the mentioned VAT rates. ''Today's (March 9) discussions were very correct and they praised Latvia for its achievements,'' said Kastens.

Both sides agreed to meet more frequently in the future. The next time the two sides could meet could already be in May.

As reported, The People's Party succeeded today, with the help of the opposition, in gaining theoretical support from the Saeima's Budget and Finance (Taxation) Committee for forwarding their amendment to the law "On Value Added Tax" (VAT) for review in the full Saeima. The amendment foresees the introduction of a reduced VAT rate for the tourism sector.

At the meeting today, Committee Chairman Guntis Berzins (New Era) called for review of the issue to be suspended for two weeks; however, this proposal was voted down by the People's Party and the opposition.

The authors of the amendments propose a reduction of VAT to 10% for hotels, motels, guesthouses and other tourist accommodation. At present, VAT in the tourism sector is 21%.

The changes were proposed in order to increase the international competitiveness of Latvian companies working in the tourism sector, as well as to stimulate development of the sector in Latvia. A lower VAT rate would allow reduction of prices for tourist accommodation, which in turn would stimulate an increase in export, indicate the creators of the proposals.

LETA also reported that Prime Minister Valdis Dombrovskis (New Era) does not exclude the possibility of reducing VAT rates for tourists; however, the defining factor will be the calculations made by the sector on the positive effects on the budget.

As the premier said following a meeting with tourism industry representatives, at present he is only in possession of the Finance Ministry's calculations of the negative aspects of a VAT reduction.