Did the VAT reduction help? Seven out of ten residents of Latvia did not notice a decrease in food prices 0 74

Almost 70% of residents in Latvia stated that they did not notice a decrease in food prices after the introduction of a reduced VAT rate on certain categories of goods. This is evidenced by the results of a survey conducted by Citadele Bank in collaboration with the research agency Norstat.

According to the study, 69% of respondents did not feel any changes in the cost of their grocery basket. At the same time, 15% reported that their spending on food had slightly decreased, while another 1% noted a significant reduction in expenses.

Meanwhile, 8% of survey participants stated that they are spending more on food than before, and 7% admitted that they do not track their daily food expenses at all.

The most noticeable effect of the price reduction was observed among young people aged 18 to 29, with 19% of respondents reporting reduced spending. The same figure was recorded among residents aged 60 to 74. The least noticeable changes were reported by respondents aged 50 to 59, with 72% of them stating that they did not feel a decrease in prices.

According to the chief economist of Citadele, Karlis Purgailis, this result is to be expected. He explained that the reduced VAT rate applies only to four groups of products — bread, milk, poultry meat, and eggs — while overall family expenses depend on the entire grocery basket, discounts in stores, and price changes for other goods.

In other words, even if certain products have become cheaper, the overall bill may not change significantly if prices for other purchases have risen simultaneously or if the family rarely buys the goods that are subject to the reduced rate.

The economist also believes that it is too early to draw final conclusions. In his opinion, the impact of the reduced VAT should be assessed over the next few months to understand how much the tax changes are truly reflected in store prices.

At the same time, Purgailis noted that, overall, the financial situation of residents is improving. Wage growth and increased purchasing power contribute to rising consumer spending, even if the decrease in prices for certain products has not yet led to noticeable savings in household budgets.

It should be noted that since July 1, Latvia has been applying a reduced VAT rate of 12% instead of 21% on four main groups of products: bread, milk, poultry meat, and eggs. This measure is currently in place for one year — until June 30, 2027.