Are VAT cuts on meat a credible proposal?

The Social Democrats proposal to reduce VAT for fresh and chilled meat to make it more affordable has been criticised by the opposition and economists. But is it a credible proposal?

“They are now aiming everything at the supermarket boycott campaign, insisting they need to do something, so this is what they are going to do. The social democrats, [Finance] Minister Šadžius and the prime minister switching positions is nothing new, we are not surprised by that with the elections approaching and their views turn upside down,” economist Rūta Vainienė said.

Vainienė criticized the measures as arbitrary, saying the government had no long-term strategy. “When it comes to the state’s strategy, we should be talking about taxes on product groups, on rates, on the tax burden, on redistribution via the state budget – that is strategy. And do we know anything about plans for taxes at least four years ahead?” Vainienė asked rhetorically.

A Swedbank survey showed that people living in the capitals of Estonia, Latvia and Lithuania spend the biggest portion of their salaries on food.

However, if these expenses are slowly declining in Riga and Tallinn, In Vilnius they remain the same – nearly a quarter of a family‘s income.

Many think that these proposals to reduce VAT are just an election ploy by the Social democrats.

“It is regrettable that the government joined the populism – the prime minister and the finance minister previously firmly and rationally explained that the VAT exemptions, for example for meat, would not benefit consumers but only food processors and sellers,” said the opposition leader Andrius Kubilius.

However, the Social Democrats continue to claim the cuts would have a positive effect.

“I think that the traders have promised to sign a memorandum of understanding with the government to reduce the prices the same percentage as the introduced VAT,” said Seimas Budget and Finance Committee Vicepresident, social democrat Bronius Bradauskas.

LRT