Czech Lawmakers Approve Ten Percent VAT Rate
The Czech Republic’s lower house of parliament has approved the introduction of a second reduced value-added tax (VAT) rate as part of the country’s 2015 draft budget.
A new ten percent VAT rate will be levied on books, pharmaceuticals, and infant formula from January 1, 2015. The rate is being introduced alongside the 21 percent headline rate and the higher reduced rate of 15 percent. The budget also includes tax breaks for parents with a second or third child and for working pensioners.
In July the IMF warned that the creation of a ten percent rate would be “an untargeted way to address a social priority, as well as an additional complication for tax administration.” The Government instead believes its budget measures will prop up the economy by boosting household spending.
The cost of introducing the ten percent rate was originally estimated to be CZK4.2bn (USD200m) annually, but recent estimates have put the cost at just CZK2.9bn.
Deputy Finance Minister, Simon Hornochová, recently said that from 2016 the 15 percent rate may be abolished. The items subject to this rate would instead be subject to the 10 percent rate, he said. Previously it had been proposed that the two higher rates could merge under a 17.5 percent rate.
Source: taxnews- Czech Lawmakers Approve Ten Percent VAT Rate
