Lithuanian president says against VAT exemptions on foodstuffs

Lithuanian President Dalia Grybauskaite on Thursday said he was against the initiative to cut value-added tax (VAT) rates on some foodstuffs.

Grybauskaite believes that the decision to implement VAT exemptions on food would only benefit producers and retailers, while consumers would benefit less.

She said that VAT exemptions would be the closest way of "granting retail chains with additional profits."

"Lots of research has been done, including by the European Commission, that said cutting VAT on foodstuffs mostly ends up in the pockets of producers and retailers," the president told journalists after attending the opening ceremony of a bread factory in Vilnius.

"Consumers are left with 15-30 percent," she added.

The president highlighted that a part of Lithuanian society is unable to buy food.

"Let's tackle this issue," Grybauskaite was quoted as saying by business news website vz.lt.

She noted the problem should be solved by taking care of those with the lowest income and increasing the level of tax-free income.

"In such a case, those with the lowest income would benefit and not vice versa," said Grybauskaite, noting this decision would require less funds from the state budget compared to the proposal to cut VAT.

The price of cutting VAT on foodstuffs would amount to 80-300 million euros (341 million U.S. dollars), believes Grybauskaite.

Last week, in order to rein in prices, social democrats, the main ruling coalition party, decided to propose to the Seimas, the Lithuanian parliament, to impose VAT exemptions on beef and pork as of October.

The party is still to decide on whether VAT should be reduced to 5 percent or to 9 percent. Currently, the standard VAT rate in Lithuania is 21 percent.