Latvia food prices drop 8.32% following VAT reduction

A price comparison released by the Latvian Competition Authority shows that food prices fell by an average of 8.32% following a reduction in Value Added Tax (VAT). The VAT reduction, which lowered the rate from 21% to 12% on items such as bread, milk, eggs, and poultry, had an expected mathematical impact of approximately 7.4% on prices.

Data indicates that major retailers, including Rimi, Maxima, and Lidl, passed these savings on to consumers in full. Specific category decreases included dairy products (8.58%), poultry (8.28%), bread (8.26%), and eggs (8.14%).

The Estonian Retailers Association noted that Latvia's experience serves as evidence that VAT reductions can effectively reach consumers, addressing concerns regarding whether tax cuts are reflected in retail prices.