BRATISLAVA, November 30, (WEBNOVINY) — From the January 1, 2011, the basic VAT rate should temporarily increase to twenty percent in Slovakia, while the reduced VAT rate of six percent on foodstuffs sold directly from farms will be canceled and the products will be taxed according to the new rate, too. The Finance Ministry prepared the increase of the VAT rate as a temporary measure which will be terminated when the deficit of the general government in Slovakia will be squeezed below three percent of gross domestic product.
Tax revenue of the state should rise by 185.5 million euro in 2011. The Ministry of Finance expects in 2012 the measure to raise additional 196 million euro, one year later the tax revenue should rise by more than 209 million euro. After the Coalition Council meeting that agreed on the higher VAT rate, Prime Minister Iveta Radicova called the temporary VAT increase by one percentage point “Fico’s Tax”. Former Prime Minister and opposition Smer-SD party leader Robert Fico called this measure to be the worst right-wing solution by which the coalition parties renege on their promises, as before elections they promised not to raise taxes.
According to analysts, increasing VAT by one percentage point could lead to increase of some prices of goods and services. People should feel the increase only slightly, the overall impact of this measure on the price level is expected to reach 0.5 to 0.8 percentage point. However, the Ministry of Finance admits that the measures introduced might cause the price level to rise. The rise of prices next year is expected to grow by 0.7 percentage point more compared to original estimates. This should be the result of increase of energy prices and the impact of consolidating measures.
SITA
