Latvia's largest agricultural organizations demand the resignation of Finance Minister Arvils Ašeradens

The largest non-governmental organizations in the agricultural sector in Latvia, the association "Farmers' Council", the association "Cooperation Council of Agricultural Organizations", the association "Association of Latvian Agricultural Cooperatives", the association "Association of Latvian Fruit Growers", the association "Latvian Gardener", and the association "Association of Latvian Fruit and Vegetable Traders", are demanding the resignation of Finance Minister Arvils Ašeradens.

Representatives of the organizations believe that the Minister of Finance has so far avoided and ignored an open discussion with representatives of the strategically important sector in Latvia, trying to find a mutually acceptable solution to maintain the reduced 5% VAT rate for vegetables, fruits, and berries typical of Latvia.

Currently, the Ministry of Finance has proposed and the government has decided on a twice higher VAT rate for the specific product group, while starting next year, the Ministry of Finance recommends that the 21% VAT rate be returned to the fruit and vegetable growing sector.

Juris Lazdins, Chairman of the Board of the Farmers' Council: "Finance Minister Arvils Ašeradens has lost not only the trust and support of agricultural organizations. The minister has lost the trust of the entire sector, “thanks” to his arrogant communication style. We can try to understand incompetence, we can try to understand ignorance about a specific sector, but we do not want to understand and accept "an apparent unwillingness to listen to the industry and its deliberate driving towards destruction."

Guntis Gūtmanis, Chairman of the Board of the "Cooperation Council of Agricultural Organizations" (LOSP): "By increasing the reduced VAT rate from 5% to 12% for vegetables, fruits and berries typical of Latvia, the shadow economy indicators will inevitably increase again. This is in clear contradiction with one of the state's priorities to combat the shadow economy in Latvia. Even more absurd is that the Ministry of Finance has turned on the “reverse gear in the shadow world”".

Māra Rudzāte, Chairwoman of the Board of the Latvian Fruit Growers Association: "By voting for a twice higher VAT rate, as well as deciding in the future on the return of the 21% VAT rate for vegetables, fruits and berries characteristic of Latvia, our industry is being doomed. Latvia will be flooded with low-quality imported fruits and berries from January 1st of next year. My question is – is Finance Minister Arvils Ašeradens ready to take responsibility for the consequences?”

What are the main risks of increasing the VAT rate from 51% to 121% (and in the future, Finance Minister Arvils Ašeradens plans to return 211% VAT) for vegetables, fruits, and berries typical of Latvia?

1. Studies show that the shadow economy in the sector will decrease from the application of the 7% VAT rate to vegetables, fruits and berries typical of Latvia. In turn, by increasing the reduced VAT rate from 5% to 12%, shadow economy indicators will inevitably increase again, which contradicts one of the state's priorities to combat the shadow economy in Latvia.

2. The shadow economy in the fruit and vegetable market has decreased, however, VAT schemes will be reinstated as soon as it is profitable.

3. The purchase and consumption of imported products in the Latvian market will increase significantly. The processing industry will be interested in purchasing imported vegetables and fruits, as they can be imported from other European Union countries with 0% VAT. For example, currently the prices of local and imported products are very competitive, but the situation will change dramatically from January 1, 2024.

4. Traceability of imported products will decrease sharply. As the shadow economy grows, the volume of imported products in Latvia will increase significantly, including from third countries. This means that Latvian consumers will be sold much more products that were grown using plant protection products that are not registered and prohibited in the EU, significantly affecting the overall quality and safety of vegetables, fruits, and berries sold in the market.

5. It is important that, contrary to the government's intention to support local farmers, by implementing its plan to increase the reduced VAT rate, Latvia will be flooded with low-quality imported products. Our growers will not be supported, but destroyed!

6. Even larger schemes are possible regarding the indication of the country of origin. There will be a higher risk that imported fruits, berries and vegetables will be indicated as grown in Latvia, which will blatantly mislead consumers.