VAT will stay at 20 percent

VALUE added tax will remain at 20 percent, even though the budget deficit dropped below 3 percent of GDP last year. This stems from an amending proposal to the VAT law submitted by Smer MPs Ladislav Kamenický and Jaroslav Demian, which parliament passed on July 8.

VALUE added tax will remain at 20 percent, even though the budget deficit dropped below 3 percent of GDP last year. This stems from an amending proposal to the VAT law submitted by Smer MPs Ladislav Kamenický and Jaroslav Demian, which parliament passed on July 8.

The original law stipulated that if the public finance deficit drops below 3 percent of GDP, VAT will decrease to 19 percent. The measure was adopted by the Iveta Radičová government as a tool to consolidate public finances.

According to EU statistics authority Eurostat, Slovakia’s budget deficit stood at 2.77 percent of VAT last year, the TASR newswire reported.

The authors of the amendment claim that a decrease in VAT would result in a drop in tax income worth €236 million in 2015. Moreover, they do not expect that lower VAT will decrease the prices of goods and services, but rather simply increase the margins of sellers, as reported by TASR.

The amending proposal also stipulates that in the following years Slovakia will continue to reduce its deficit in accordance with European and national fiscal rules.

“The target value of the deficit in 2015 is set at 2.49 percent of GDP, in 2016 at 1.61 percent of GDP, and in 2017 at 0.54 percent of GDP,” Kamenický said, as quoted by TASR, adding that achieving these goals will stop a post-crisis increase in the share of the public debt on GDP with the aim not to exceed the level of 57 percent of GDP.

The MPs stated in the proposal that international financial institutions recommend that Slovakia amend its tax mix, with a focus on indirect taxes, as reported by TASR.

The opposition, however, has criticised the proposal, arguing that Smer objected to higher VAT during its pre-election campaign, saying it would affect mostly people with low income through increases in prices of basic goods and services. It also objected to the way in which the law was amended, and claim that the government wants to use the money received through VAT on it they called nonsensical measures, rather than, for example, on a flat decrease in payroll levies, the SITA newswire wrote.

Source: TASR, SITA

Compiled by Radka Minarechová from press reports

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