Dombrovskis allows possibility that consumption taxes could be reduced to curb inflation

RIGA – “It is possible that some consumption taxes could be cut to curb inflation,” Latvian Prime Minister Valdis Dombrovskis (Unity) told the LNT morning show "900 sekundes" today.

The prime minister pointed out that the rising fuel prices currently have the most significant impact on inflation. Therefore various options are being considered to reduce this impact, including limited reductions in excise tax, writes LETA.

“The Finance Ministry's plan to curb inflation, which was drafted last year, is being debated once again, since economic development has turned out steeper than predicted back then,” explained Dombrovskis.

The prime minister emphasized that inflation curbing measures must come into force by the middle of the year.

At the same time, Dombrovskis admitted that all decisions regarding tax changes must be balanced, because it is necessary to take into account that some sectors will have fewer opportunities to request additional budget funding if some of the taxes are cut.

As reported, work on a government strategy for reducing inflation, launched last summer, has not advanced much further since, and no official document has been drawn up yet.

Last August, Finance Ministry State Secretary Sanita Bajare said in an interview with LETA that the ministry had prepared a report and initial proposals for reducing inflation in Latvia, which were handed in Dombrovskis, who had to decide on further action.

According to what Bajare said then, the Finance Ministry's report offered short and long-term measures. On Aug. 16, Dombrovskis told reporters that the Finance Ministry's measures for reducing inflation would be evaluated and it would be decided which of these measures would be reviewed by the government, so the strategy could be approved in 2011 yet.

However, the matter has never been included on the government's agenda.

The Finance Ministry confirmed to LETA that some of its proposals had been taken into consideration during while drawing up the 2012 state budget, however, no tasks were given to the ministry to draw up a strategy for reducing inflation. Nevertheless, the ministry has been scrupulously following inflation indicators, which will be of crucial importance when Latvia's conformity with the Maastricht criteria is evaluated.