17th April 2014

Government coalition agreed on the introduction of new VAT rate for medicaments, books, baby diapers and irreplaceable child nutrition in 2015

All three coalition parties agreed on Wednesday night on moving medicaments, books, baby diapers and irreplaceable child nutrition from reduced rate of 15 % to the new special 10% that is to be introduced in 2015. Ministry of Finance will be responsible for the change and for the introduction of new legislation. However, the new third VAT rate is opposed by the entrepreneurs. Patria Finance economist David Marek explains that the introduction of third VAT rate would bring additional administrative costs. Pro Factum Consulting tax consultant Petr Frisch claims that the change would not mean lower prices for end consumers but it would mean approx. CZK 20 bn loss from VAT collection that would have to be compensated by stricter tax collection control. David Marek adds that the retail price change is dependent on the price elasticity and the impact will vary for example for books v for medicaments. Also the move of baby diapers to this reduced rate will have to be negotiated and agreed on with EU which could cause further delay in implementation of tax legislature.

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Members of the American Chamber of Commerce in the Czech Republic