Latvia to Funnel Gambling, Other “Sin Tax” Funds Into Culture

The Latvian government decided to bring the so-called “sin taxes” system back from retirement to fund its State Culture Capital Foundation. Gambling, alcohol, and tobacco will thus be taxed at a certain rate and proceeds will be used to sponsor different culture projects in the country. A similar system has been adopted in Lithuania and Estonia and tax money has been contributed to projects of diverse nature.

The government of the Baltic country confirmed Tuesday that there will be new taxes in order for much-needed revenue for culture to be secured, and that gambling services conducted across the nation will be one of the activities that will be taxed for the purpose.

The new regime is set to come into force in 2022. There will be a transition period between 2019 and 2021, during which the government will keep money flowing to the foundation in the form of the annual subsidy it has been contributing over the years.

Under the new taxation system, the so-called “sin taxes” will apply to gambling activities, alcohol and tobacco. The State Culture Capital Foundation will thus receive 3% of an excise alcohol tax, 2% of an excise tobacco tax, 2.21% of a gambling tax, and 1.37 of a tax on lottery operations. As mentioned above, the foundation has mainly been funded by government subsidies over the past several years.

The change in the financing scheme came more than a decade after representatives of the Baltic nation’s creative industries first called for independent financing of the foundation.

Tax Revenue Allocation

The new, independent, revenue contributions will be used by the foundation to organize three culture project competitions annually, to fund different projects related to the organization of events that mainly target children and youths, and to provide between 10 and 20 lifelong stipends, a program it has been conducting for years now.

The new scheme is also expected to enable the organization to enhance its funding to different programs aiming to support cultural activity across Latvia.

The State Culture Capital Foundation had previously used independent financing from the so-called “sin taxes.” However, the system was abolished back in 2004 and it is only now that it has been revived to support culture across the Baltic nation. As mentioned above, Lithuania and Estonia both have similar regimes in place.

The reformed financing for the foundation’s budget represents a decade-long lobbying effort for the provision of government-free revenue sources. According to reports from local media, the government also needs to implement changes to the law that governs the organization and its work throughout the year. It is understood that lawmakers are working on such law amendments but it is yet to be seen when these will be introduced and implemented. The new financing scheme is slated for 2022 implementation.

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