High VAT rate hampers pig industry Latvia

Pig industry Latvia
Only 5 countries in the European Union, including Latvia, have not lowered the VAT on pork products. Photo: Shutterstock

The pig industry in Latvia asked the authorities to lower the VAT rate on pork before the industry is destroyed completely by high costs and imports from Poland and Germany.

Only 5 countries in the European Union, including Latvia, have not lowered the VAT on pork products. Dzintra Leiniece, head of the pig farmers association, mentioned this to local news outlet LSM, adding that soon, only 4 countries would be left on this list, as Denmark is currently on the way to cut down its VAT rate.

‘VAT is our pain’

The standard VAT rate in Latvia is 21%. Since April, Latvian pig farmers have been urging the authorities to lower it to 5%. “VAT is our pain. We remain uncompetitive compared to German and Polish producers, who have their rate reduced,” Leiniece said. He pointed out that in neighbouring Poland, pork is exempted from VAT. “Europe is a single market, and we have to compete with each other. That is why the European Commission expressed concerns about the viability of the economies of small countries, such as the Baltic countries,” he added.

New government

The decision on VAT is still pending as the new government is yet to be formed. Leiniece called the ruling political parties to speed up the processes, warning that the current winter is going to be hard for Latvia and politicians have no time to lose.

Pig industry in Latvia in trouble

Latvia keeps losing pig farms, including some big industrial producers. Since the New Year, 3 companies, Ekolande, Kunturi, and Seļi, plan to curtail production. Leiniece said that numerous companies have made losses for nearly 2 years. “Pig farmers understand that working in the red zone for a long time is impossible. Everyone counts money and understands what they can and cannot do,” he said.

Energy and feed prices skyrocketed

Currently, Latvian pig farmers buy feed grain for € 300 to 310 per metric tonne. In addition, electricity prices also skyrocketed this year. As estimated by Leiniece, for some pig farms, the energy costs jumped by 370% compared to the previous season. As a result, production costs now reach € 1.7 per kg of pork in slaughter weight. Over the past year, the farmgate pork prices have risen from € 1.2 to 1.5 per kg.

This year’s price rise on the pork market is one of the strongest in recent years, but it is still not enough to compensate pig farmers for a rise in production costs, he said.

Vladislav Vorotnikov Eastern Europe correspondent
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