Analytics, Latvia, Markets and Companies, Retail

Representatives of retail chains foresee that as the VAT rate will be raised from 18% to 21%, also the average price increase could amount to approximately 3%.

Commenting on the prospective rise of prices that will follow increase of the excise tax and VAT rate, spokeswoman of grocery store chain Elvi grupa, Vineta Grigane, says that the volume of price increase will vary among different categories of goods.

Representative of the tobacco company Bristish American Tobacco Latvia, Marita Jansone, admits that, as of the next years, the excise tax will be raised also for cigarettes, and their retail price could surge by approximately 20%.

"There are no doubts that the surge in prices will impact the market situation. It can be proved by the data of year 2008 – in wake of the tax rate increase, the prices for tobacco products grew an average of 50%, as a result of which the volume of illegal trade almost doubled.

Grigane also predicts that the steepest price increase will be observed for printed media publications, baby food and other goods, for which earlier the reduced 5% VAT rate applied. In her opinion, book publishers will suffer the most from the price increase.

"The situation could change also after the new excise tax rate is applied to fuel, usually increase of fuel prices leaves a visible impact on all other prices. If the cost of oil products surges, the prices for all other products will soar as well," representative of Elvi grupa warns.