Extra EUR 83 million may be raised for health care by lifting reduced VAT on medicines

RIGA - The Latvian Finance Ministry will consider the proposal to lift the reduced value-added tax (VAT) on medicines and medical equipment which would bring additional EUR 83 million for health care financing and promises that the move "will not affect the end price of medicines".

The National Trilateral Cooperation Council comprising representatives of the government, employers and trade unions at a meeting today listened to the proposal by the Latvian Confederation of Employers (LDDK) to ask the Finance Ministry to consider the proposal to lift the reduced VAT on medicines and medical equipment on condition that the financing thus raised will be spent entirely on health care needs.

Jurijs Spiridonovs, an advisor to Finance Minister Dana Reizniece-Ozola (Greens/Farmers), said at the council meeting that after receiving the LDDK proposal the ministry had made an inquiry with the State Revenue Service and had concluded that in principle only drugstores benefited from the reduced VAT rate on medicines.

He said the Finance Ministry together with the Health Ministry will consider the LDDK proposal in the coming weeks but preliminary estimates suggested that lifting the reduced VAT on medicines and medical equipment would bring additional EUR 83 million for health care financing.

Speaking to the press after the meeting, Spiridonovs underlined that lifting of the reduced VAT on medicines will not result in increase of the end price of medicines. "To prevent prices of medicines from growing, we will change the drugstores' policy of setting the retailer's margin that is governed by special Cabinet of Ministers regulations," the Finance Ministry representative said.

Egils Baldzens, the leader of the Latvian Confederation of Free Trade Unions (LBAS), told the press that the trade unions were willing to consider the LDDK proposal. "The main thing is that the prices of medicines should not increase as a result of this reform. From what the Finance Ministry said today, it seems realistic," he said.