Fuel, alcohol, and tobacco buyers will strengthen the country's treasury. This is what the authorities are counting on

The beginning of 2026 is relatively calmer than 2025, when significant changes to the tax system came into effect, but the new measures will still affect people's lives both directly and indirectly, writes Dienas Bizness.

This is how tax expert Ainīs Dabols assesses the overall impact of tax changes. He noted that there are relatively few tax innovations in the state budget package for 2026, but it should be taken into account that the increase in rates for some taxes, primarily excise taxes, was anticipated back in the fall of 2024 when the budget for 2025 was approved.

"The excise rates on alcoholic beverages, tobacco products, and fuel for 2026 were set two years ago, but now everyone will feel their impact," Dabols explained, adding that people will fully realize the changes in tax rates and their impact on purchasing power only with the start of the new year and after receiving the first salary for January 2026.

The tax expert also points out that changes have been made to the value-added tax law, introducing a rate of 12% for a period of one year - from July 1, 2026, to June 30, 2027 - on certain food products: bread, milk, fresh chilled poultry meat, and fresh eggs.

"At first glance, this may seem like good news for buyers and retailers, but what the real prices will be will be shown by time," the expert warned.

He emphasized that thus Latvia will join the ranks of EU countries with a reduced VAT rate on food just a few months before the planned parliamentary elections, as currently, the 12% rate only applies to fresh fruits, berries, and vegetables.

In 2026, the planned increase in excise rates announced in the fall of 2024 will also come into effect, which will now also include part of the fuel tax on CO₂ emissions.

"The first increase in excise taxes was implemented on January 1, 2025. Now, starting in 2026, the next step will follow - and most likely not the last one, as a result of including the cost of fuel, the prices of CO₂ emission quotas, which are currently around 90 euros per ton, should raise its retail price by several dozen cents per liter," the expert explained.

The increase in the excise tax on fuel will affect the production and transportation of almost all goods, as well as the service sector, since transportation costs will rise, which will be factored into the price of the final product, or the economically justified distance for transporting certain types of goods will decrease.