RIGA – Latvian lawmakers voted to reduce the value-added tax on hotels, daily papers and periodicals in a move aimed at jumpstarting the hospitality industry before the start of the tourist season.

The tax cut, from 21 to 10 percent, was supported by a broad swathe of parliamentarians, including the newly opposition People’s Party and the minority-rights party For Human Rights in a United Latvia. The reduction is essentially a reversal of a tax hike that went into force last year — when hotel rooms had been taxed at a 5 percent VAT rate — as a desperation measure to [private_supervisor]raise revenues. However, in recent months many lawmakers, primarily in the People’s Party and the pro-business Latvia’s First/Latvia’s Way union, have complained that the VAT on the hospitality industry should be lowered in order to stimulate tourism, one of the few sectors where Latvia could score significant short-term gains, according to some experts.

The tax cut will go into force on May 1, and lawmakers voted to maintain the lower rate until 2012.

It is not clear how international creditors will react to the cut, which Latvia hopes will create 2,000 jobs. Prime Minister Valdis Dombrovskis said the IMF was neither for nor against the measure and instead questioned the rationale of supporting one sector over another.

Few would argue that the hospitality sector is hurting. The statistics bureau announced last month that guest stays in the fourth quarter of last year fell 23 percent compared to the same period in 2008. Of the some 216,000 overnight stays during the three months, one-third was comprised of Latvian residents and two-third foreigners.

However, some experts have suggested that the lower VAT on hotels will not result in cheaper rooms. Nelli Jezdakova, head of the State Revenue Service, expressed this viewpoint last month, for which she was castigated by local business magnate and Riga Deputy Mayor Ainars Šlesers. One expat with several years in the industry told Baltic Reports that hotels would unlikely lower their rates since they are already bottomed out.

Meanwhile, the center-left opposition party Harmony Center tried to use the occasion to lower VAT on medicine to 5 percent, a move that was blocked by lawmakers from several factions. One deputy said that such a cut was unconstitutional since it did not specify how the budget would cover losses, the Baltic News Service reported. [/private_supervisor] [private_subscription 1 month]raise revenues. However, in recent months many lawmakers, primarily in the People’s Party and the pro-business Latvia’s First/Latvia’s Way union, have complained that the VAT on the hospitality industry should be lowered in order to stimulate tourism, one of the few sectors where Latvia could score significant short-term gains, according to some experts.

The tax cut will go into force on May 1, and lawmakers voted to maintain the lower rate until 2012.

It is not clear how international creditors will react to the cut, which Latvia hopes will create 2,000 jobs. Prime Minister Valdis Dombrovskis said the IMF was neither for nor against the measure and instead questioned the rationale of supporting one sector over another.

Few would argue that the hospitality sector is hurting. The statistics bureau announced last month that guest stays in the fourth quarter of last year fell 23 percent compared to the same period in 2008. Of the some 216,000 overnight stays during the three months, one-third was comprised of Latvian residents and two-third foreigners.

However, some experts have suggested that the lower VAT on hotels will not result in cheaper rooms. Nelli Jezdakova, head of the State Revenue Service, expressed this viewpoint last month, for which she was castigated by local business magnate and Riga Deputy Mayor Ainars Šlesers. One expat with several years in the industry told Baltic Reports that hotels would unlikely lower their rates since they are already bottomed out.

Meanwhile, the center-left opposition party Harmony Center tried to use the occasion to lower VAT on medicine to 5 percent, a move that was blocked by lawmakers from several factions. One deputy said that such a cut was unconstitutional since it did not specify how the budget would cover losses, the Baltic News Service reported. [/private_subscription 1 month] [private_subscription 4 months]raise revenues. However, in recent months many lawmakers, primarily in the People’s Party and the pro-business Latvia’s First/Latvia’s Way union, have complained that the VAT on the hospitality industry should be lowered in order to stimulate tourism, one of the few sectors where Latvia could score significant short-term gains, according to some experts.

The tax cut will go into force on May 1, and lawmakers voted to maintain the lower rate until 2012.

It is not clear how international creditors will react to the cut, which Latvia hopes will create 2,000 jobs. Prime Minister Valdis Dombrovskis said the IMF was neither for nor against the measure and instead questioned the rationale of supporting one sector over another.

Few would argue that the hospitality sector is hurting. The statistics bureau announced last month that guest stays in the fourth quarter of last year fell 23 percent compared to the same period in 2008. Of the some 216,000 overnight stays during the three months, one-third was comprised of Latvian residents and two-third foreigners.

However, some experts have suggested that the lower VAT on hotels will not result in cheaper rooms. Nelli Jezdakova, head of the State Revenue Service, expressed this viewpoint last month, for which she was castigated by local business magnate and Riga Deputy Mayor Ainars Šlesers. One expat with several years in the industry told Baltic Reports that hotels would unlikely lower their rates since they are already bottomed out.

Meanwhile, the center-left opposition party Harmony Center tried to use the occasion to lower VAT on medicine to 5 percent, a move that was blocked by lawmakers from several factions. One deputy said that such a cut was unconstitutional since it did not specify how the budget would cover losses, the Baltic News Service reported. [/private_subscription 4 months] [private_subscription 1 year]raise revenues. However, in recent months many lawmakers, primarily in the People’s Party and the pro-business Latvia’s First/Latvia’s Way union, have complained that the VAT on the hospitality industry should be lowered in order to stimulate tourism, one of the few sectors where Latvia could score significant short-term gains, according to some experts.

The tax cut will go into force on May 1, and lawmakers voted to maintain the lower rate until 2012.

It is not clear how international creditors will react to the cut, which Latvia hopes will create 2,000 jobs. Prime Minister Valdis Dombrovskis said the IMF was neither for nor against the measure and instead questioned the rationale of supporting one sector over another.

Few would argue that the hospitality sector is hurting. The statistics bureau announced last month that guest stays in the fourth quarter of last year fell 23 percent compared to the same period in 2008. Of the some 216,000 overnight stays during the three months, one-third was comprised of Latvian residents and two-third foreigners.

However, some experts have suggested that the lower VAT on hotels will not result in cheaper rooms. Nelli Jezdakova, head of the State Revenue Service, expressed this viewpoint last month, for which she was castigated by local business magnate and Riga Deputy Mayor Ainars Šlesers. One expat with several years in the industry told Baltic Reports that hotels would unlikely lower their rates since they are already bottomed out.

Meanwhile, the center-left opposition party Harmony Center tried to use the occasion to lower VAT on medicine to 5 percent, a move that was blocked by lawmakers from several factions. One deputy said that such a cut was unconstitutional since it did not specify how the budget would cover losses, the Baltic News Service reported. [/private_subscription 1 year]

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