Prime Minister won’t follow other Baltic states with VAT increase to fund military
Latvia’s Prime Minister, Evika Silina, has quashed speculation by here Finance Minister of a 1% VAT increase to 22%. But further tax rises will have to be found as security spend rises following the Russian invasion of Ukraine.
According to seasonally adjusted data, Latvia’s GDP shrank by 0.4% in Q2 2024. Rising spending pressures related to defence, internal security, health and old age poverty need to be addressed by raising spending efficiency and tax revenue.
Estonia is debating a second emergency VAT increase to 25% in 2025.
Finance Minister’s VAT rise proposal rejected
Finance Minister Arvils Ašeradens had raised the idea of raising the VAT rate at the beginning of the summer, a possibility now rejected by the Prime Minister.
In addition, in recent weeks there has also been talk of a new surplus tax on banks, which could be levied as a pledge against banks having to increase lending. However, as with other planned changes, there is no final version of what this will look like in reality.
