Cutting VAT on heating not the best solution says PM

Feb 13, 2013

RIGA - Reducing value added tax on heating is not the best way to achieve lower heating bills for residents; instead, local governments should do more regarding insulation of buildings and providing social aid to the needy, Prime Minister Valdis Dombrovskis (Unity) said in an interview with LNT television today.

Reducing VAT on heating would rather be in the interest of residents who own large private homes or apartments, or people who are not indigent at all. In turn, this would mean smaller budget revenue, therefore less money could be spent on, for instance, insulation of buildings, explained Dombrovskis.

According to the premier, cutting VAT on heating would reduce heating bills by about 10 percent. On the other hand, building insulation may achieve a 50 percent reduction in heating bills, he said.

Local governments can distribute housing benefits already now to those residents who need them, emphasized Dombrovskis.

Also, it is unclear why the Riga City Council is doing so little to insulate apartment buildings in the city, said Dombrovskis, noting that there were more insulated buildings in Valmiera and Liepaja than in Riga. Riga City Council should also better supervise the operations of the municipal heating company, he said.

Riga Mayor Nils Usakovs (Harmony Center) is keen at offering free rides in public transport, but he is not paying enough attention to matters that are really important, said Dombrovskis.

As reported, several hundred people participated in a rally at the government building yesterday demanding that VAT rate on heating be reduced from 12 percent to 5 percent.

The rally was organized by union "LABA," which says that it will organize more protests until its demands are heard and the VAT on heating is lowered, as the union's deputy head Vladislavs Bartasevics told LETA.

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