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Cabinet to raise VAT to meet demands

THE CABINET has agreed to raise consumption tax (VAT) rates to compensate for higher-than-expected state budget spending next year, but will keep the expected public finance deficit at the targeted 5 per cent of GDP.

The agreement was reached at an October 26 cabinet debate on the 2003 budget draft, at which Finance Minister Ivan Mikloš was forced to give in to demands from some cabinet ministers for more funds.

If approved by parliament, the change will increase the lower band of VAT from 10 to 13 per cent as of January 1, 2003, while dropping the upper rate from 23 to 20 per cent. The VAT bands will be merged at 17 per cent as of January 2004, when Slovakia hopes to enter the European Union.

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