2011 changes in VAT had negative impact on the cultural sector.
4.1 Main cultural policy issues and priorities
The economic crisis and recession have influenced the agenda of cultural policy priorities. In December 2008, the government elaborated a stabilisation plan, comprising a number of stringent measures designed to reduce fiscal spending and increase tax revenues.
The tendency towards an increase in the budget was still evident up to the year 2008. In 2009 there was a dramatic drop in public financing for culture. It was followed by an even deeper crisis in 2010 when the budget of the Ministry of Culture was reduced by 43% compared to 2008. The majority of cultural operators are concerned about the critical reduction of the budget for the State Culture Capital Foundation – the grant-giving body to secure the diversity of cultural activities all over Latvia. In 2010, its budget was reduced to 2.1 million LVL (3 million EUR), which was by 72% less than in 2008 (see chapter 6.1).
At the end of 2009, VAT was increased from 18% to 21% and in 2011 the rate was increased again to 22%. The reduced VAT rate was increased from 5% to 10% in 2009 and from 10% to 12% in 2011. Initially, books, press, cinema tickets and the tourism industry could benefit from the reduced VAT rate. In 2011 however, reduced VAT applies only to press, certain categories of books and accommodation services at tourist lodgings. These changes have left a negative impact on cultural industries (see chapter 4.2.3).
The most active public debates have been on the topic of the new cultural infrastructure projects (see chapter 4.3). Building of the Latvian National Library (started in 2008) is constantly a topic of public debate. The investments in other fields are continuing thanks to the support of the EU Structural funds (see chapter 4.2.8 and chapter 8.4.2).
For reforms in the cultural education system see chapter 8.3.1.