VAT hike to affect hotel prices

Although Slovaks pay less than foreigners for rooms in some hotels, this is likely to change soon as the 2003 state budget draft has suggested an increase in value-added tax (VAT) for hotel and restaurant services.

Based on the budget draft, VAT for hotel services would increase from the current rate of 10 per cent to 13 per cent, and VAT for restaurant and catering services would rise from 10 per cent to 20 per cent.

According to hoteliers, a VAT hike would certainly be reflected in a price increase, but they say they don't expect a drop in the number of clients.

Slovakia currently has two rates of VAT which apply to different products; the lower rate stands at 10 per cent, while the higher rate is 23 percent. The proposed hike in VAT on hotel and restaurant services reflects aims to find a balance between these two rates, based on the EU model.

EU member countries that have two rates of VAT are also in the process of balancing them out.

According to Róbert Prega, an analyst with Tatra Banka, if Slovakia decided to unify its VAT rates in the future, it would probably end up with one rate of between 15 per cent and 18 per cent.

- Peter Barecz

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