Latvia, Markets and Companies, Society, Taxation, Wages

The association’s representatives noted that a workgroup for easing the tax burden and red tape in the food service industry has been preparing proposals for some time already. The workgroup includes representatives of the Finance Ministry, the Latvian the Restaurateurs’ Society, the Hotels and Restaurants Association, the Economics Ministry and the State Revenue Service. At the workgroup’s meeting on August 1, a conceptual agreement was reached with the Finance Ministry on the necessity to lower taxes and support the food service industry.

Andrejs Grigolunovics, a financial adviser to the Restaurateurs’ Society, indicated during the workgroup’s meeting with Finance Minister Dana Reizniece-Ozola (Greens/Farmers) that in the European Union, the average VAT rate on restaurants is 14% and that in a number of countries it is in the range from 3 to 10%. In Latvia, the optimal VAT rate would be 12% instead of the current 21%. According to the information provided by the restaurateur’s organization, the projected drop in budget revenues that would be caused by the tax cut would be compensated with additional EUR 9 mln VAT revenues (thanks to the industry’s faster growth) and EUR 28 mln worth of labor tax revenues.

“The tax burden in the Latvian restaurant industry is one of the heaviest in Europe and it is incommensurable with the clients’ purchasing power. At the same time, there is a chronical shortage of labor force in our country. As a result, virtually all participants of the industry are suffering losses – 75% of our members have outstanding tax debts and restaurants are forced to look for various tax optimization solutions,” said the organization’s president Janis Jenzis.

He said that if the agreement on the minimum wage in the food service industry is reached the employers and trade unions, other market players are likely to join the agreement as well.

LNT commercial TV channel reported on Wednesday that under an agreement that has been reached in principle with the Finance Ministry the value added tax (VAT) rate on food services might be reduced to 12% from the current 21% on the condition that the caterers stop paying wages under the table.

Finance Minister Dana Reizniece-Ozola (Greens/Farmers) stressed that VAT on food services could be lowered only on the condition that the caterers stop paying unreported wages. In her words, the National Tripartite Cooperation Council, which brings together representatives of the government, entrepreneurs and trade unions, is expected to discuss the proposal at its meeting next week.