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Smer proposes reduced VAT rate of 5 percent

THE WINNER of Slovakia's parliamentary elections, the left-wing Smer, proposes a reduced value-added tax (VAT) rate of 5 percent on selected foods as well as medicinal drugs and medical aids.

According to Smer leader Robert Fico, no parties with which his party is negotiating to form the new government have had any problem with this proposal.

Smer gained nearly 30 percent of the vote on June 17 and will likely lead the new coalition government,

Currently Slovakia has a single VAT rate, which is the same as the income tax rate for corporate entities as well as individuals - 19 percent.

Fico's Smer plans to compensate for the state budget shortfall that would result from the reduced VAT rate by increasing taxes on monopolies, banks and financial institutions, although he admitted this might not prove enough to balance the loss.

"We are able to secure these changes in such a way that the final fiscal result will be neutral," Fico said, adding that cutting expenditures might be another way to achieve that balance, the SITA daily wrote.

Compiled by Martina Jurinová from press reports

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