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VAT to be reduced on some foods

AS PROMISED, the Robert Fico government has reduced the value added tax on selected foods from 20 to 10 percent. The parliament passed the related revision to the law on value added tax (VAT) on October 1, while the final list of foods with reduced VAT was revealed only one day before the new legislation was approved.

Meat, illustrative stock photo(Source: TASR)

The VAT will fall as of the beginning of 2016 on meat and freshwater fish, but only fresh not frozen; milk, butter and fresh bread.  

“I am very glad that my government has met the promise that it has given within the second social package and will contribute to a vital reduction of basic foods’ prices,” said Prime Minister Robert Fico as cited by the SITA newswire.

PM Fico believes that apart from cheaper foods the reduced VAT will mean also support for local producers. He explained the limited list of foods with reduced VAT with budgetary limitations, while the selection of concrete foods on the list is intended to support consumption of foods produced in Slovakia. The list might be extended in the future.

The VAT-reduced list of foods was submitted by deputies for Smer, Ladislav Kamenický and Daniel Duchoň, within an amendment to the VAT law’s revision. Out of 137 deputies 99 voted for their proposal, with only two deputies against. The rest abstained from voting.

The Finance Ministry estimates the annual impact of the reduced VAT on budgetary revenues at €80 million while in 2016 it should be €76.9 million, in 2017 €80.6 million and in 2018 €84.6 million.

But the reduced VAT may not necessarily reflect in lower food prices in shops. Finance Minister Peter Kažimír believes that to achieve this, public pressure is needed. According to Fico, a real drop of prices should be secured by a memorandum to be prepared by the Agriculture Ministry. In it also merchants should bind themselves to ensuring that the reduced VAT would reflect in the end prices. Moreover a proposal has been tabled to display reduced VAT foods also with the original price with the 20-percent VAT.

The opposition criticised the list of the VAT-reduced foods, seeing it as too narrow as well as the fact that the list was made public only on September 30.

Eugen Jurzyca of Freedom and Solidarity (SaS) spoke about economic and social nonsense.

“We in our programme support a flat reduction of VAT to 19 percent and return to the flat income tax, which after various income and payroll tax deformations are removed is maintainable at the level of 15 percent,” said Jurzyca as cited by SITA.

But the VAT reduction proposal was supported in parliament also by some opposition deputies including those from the Christian Democratic Movement (KDH).

Pavol Zajac, MP for KDH, said that they did it because they themselves were pushing for such proposals. But they are not completely satisfied with the final list. They would like to see in it also fruit, vegetables and other healthy food.

Representatives of the non-parliamentary party Skok do not like the discussion itself that preceded the approval of the proposal in parliament.

“Instead of real discussion about the fact that VAT on foods in Slovakia is the highest from among neighbouring countries, the parliamentary discussion turned into mutual accusations who, when and by how much taxes increased,” said Martin Chren from Skok as cited by SITA.

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Topic: Finances and Advisory


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