Starting next year, Slovakia will reduce VAT on a specified list of staple foods, such as bread, meat, milk, and butter, from 20 per cent to 10 per cent, the government has announced.
In order to make sure the measure will translate into lower-end prices for customers, the government will hold talks with retailers and sign memoranda with them, and introduce patrols keeping tabs on the prices concerned, TASR news agency quoted Slovak PM Robert Fico as saying.
According to Ľubomír Drahovský, an analyst with the Terno market research agency, reducing VAT at least by one half should prevent cross-border purchases, as neighbouring countries currently have significantly lower VAT on food than Slovakia.
“Moreover, it would create space to allow not only big domestic production, but also local production to find its place in the market,” Drahovský told The Slovak Spectator weekly.
In March, the Financial Policy Institute, which runs under the Slovak Finance Ministry, and the Organisation for Economic Cooperation and Development prepared a report on the Slovak VAT system.
Their micro-analysis on the possible implementation of a lower tax rate on food and drinks in Slovakia suggested the following: "Up to 35 per cent of total lost incomes from reduced tax rates would lead to benefits for richer families, compared to 25 per cent in the case of low-income households."
© 2015 European Supermarket Magazine – your source for the latest retail news. Article written by László Juhász.
