Evaluation of the Effectiveness of the Implementation of a Reduced Value Added Tax Rate at 5% for Eggs, Fresh Meat, Basic Dairy Products, and Fresh Fish

Project description

The study aims to evaluate the impact of reducing VAT rates for various food product groups in Latvia on prices, consumption, production, producer competitiveness, the state budget, and the shadow economy. It also examines the social effects of such reductions and models scenarios for implementing reduced VAT rates on food with minimal negative impact on overall state budget revenues. The research provides a quantitative and comprehensive assessment of the effects of VAT rate reductions on food products, forming a scientific basis for decision-making regarding this policy.

The analysis balances the interests of businesses, society, and the state by assessing potential gains and losses from VAT reductions. It includes an overview of other EU countries' experiences with VAT on food, analyses of tax revenue structures and social spending, and the social role of VAT on food.

The study also develops a mathematical model to simulate the effects of VAT reductions, incorporating demand factors, shadow economy dynamics, and price impacts. The results offer alternative tax policy solutions and evidence-based recommendations for addressing socio-economic challenges in Latvia.