A hard stance on soft drinks: Companies protest against government's tax-rise decision

Soft drinks manufacturers in Czechia are speaking out against the government’s plans to raise non-alcoholic beverages to the highest rate of value-added tax (VAT) – 21 percent. 

The Kofola company and the Mattoni 1873 group, which are some of the biggest drinks producers in Czechia, have labeled the government’s plans as “absurd.” The Czech Association of Mineral Waters (AMW) has also said that the new rate is incomprehensible.

The VAT rate for non-alcoholic drinks is currently at 15 percent. The planned rise in VAT will mean that consumers will pay more for water and other soft drinks.

AMW president Jana Ježková pointed out the unjustness of the VAT rate for foods being reduced to 12 percent, while that of soft drinks increased. 

She said that the government’s justification for doing this – due to the negative health effects of certain sugary soft drinks – was inadequate, as bottled spring water is also subject to the tax rise.

“It does not make sense for producers to include herbal teas, or fresh fruit and vegetable juices, among unhealthy items," said the CEO of Kofola ČeskoSlovakia. Even baby water – a type of purified water for infants – will be taxed higher, the AMW noted.

Minister of Finance Zbyněk Stanjura, however, defended the VAT change and said that it was much better to have a simpler system for taxing drinks, because of fewer VAT brackets. The government plans to have just two, instead of the current three. 

Another defense that Stanjura used was the fact that negotiations over the fiscal package were divided in the coalition, so it was natural to have a compromise. He also mentioned that the interpretation of some foods as (un)healthy is subjective.

Unions and business groups are largely unhappy with the government’s package of changes. Earlier this afternoon, the Bohemian-Moravian Confederation of Trade Unions announced a so-called strike alert against the changes and is currently asking the government to renege on some changes.

Soft drinks companies are just some of the several businesses negatively affected by the tax rises – time will tell whether all VAT changes will come into force in 2024.