Lithuanians increasingly shop in Latvia after food VAT cut

Latvia has lowered value-added tax (VAT) from 21% to 12% on eggs, bread, milk and chicken, and shoppers from neighbouring Lithuania and Estonia are increasingly buying food there. This was reported in October 2026 by Lithuanian media and discussed by Latvian economist Pēteris Strautiņš, who argues that selective food tax breaks are not the best policy and that the Baltic states should avoid tax competition.

What Lithuanian media report

The Lithuanian portal TV3.lt wrote on 19 August that residents near the border, including around Žagarė, buy fuel, alcohol and also food in Latvia, such as curd, sour cream, soured milk and sweets. The newspaper Kauno Diena, citing card data from the payment service Revolut, reported that Lithuanian customers spent about 220,000 euros on food in Latvia in June, 313,000 in July and roughly 330,000 in August.

In early October, Lrytas.lt quoted Daini Dundulis, head of the Lithuanian retail chain Norfa, who acknowledged that the reduced VAT has drawn some Lithuanian shoppers to Latvia. The outlet's journalists visited Daugavpils and noticed many cars with Lithuanian plates; Lithuanians there also buy building materials and other goods.

The economist's view

Strautiņš notes that shopping trips to Latvia are not new and are not driven by taxes alone: alcohol shops stand near the borders, and southern Estonians exploit different retail chains' promotions. Poland, he says, remains a likelier destination for Lithuanians.

He estimates the additional VAT cut costs the state budget about 30 million euros in the second half of 2026. He considers complex tax regimes a source of extra costs, and says the Baltic states, which already run budget deficits and face high defence spending, cannot afford tax competition.

What shoppers want

Monitoring and a public survey show shoppers would like reduced VAT on a wider range of dairy products, including cheese, sour cream and curd, as well as cereals, oil, coffee and tea.