The Czech government finally passed its austerity package through the lower house on Friday, aiming to save CZK 150 billion improvement in the state budget over the next two years. Within the package are adjustments to the country's value-added tax (VAT) system, which will undergo significant changes from next year.
The package introduces two VAT rates (12 percent and 21 percent), consolidating the three previous rates (of 10 percent, 15 percent, and 21 percent), with lower rates for food products and higher rates for beverages, certain services, and draft beer.
How will these changes affect consumers? While many products will see a only slight change in their VAT rate, some will experience a bigger shift, leading to a noticeable impact on the wallet.
Books are a big winner in the new package, being listed as a special item with no VAT rate, while draft beer is set to become about ten percent more expensive. Here's a full breakdown of VAT changes poised to take effect from next year, sourced from the website of the Czech Ministry of Finance:
⬇️ VAT to drop from 10 percent to zero:
⬇️ VAT to drop from 21 percent to 12 percent:
⬇️ VAT to drop from 15 percent to 12 percent:
⬆️ VAT to rise from 10 percent to 12 percent:
⬆️ VAT to rise from 15 percent to 21 percent:
⬆️ VAT to rise from 10 percent to 21 percent
It's worth noting that these VAT changes are expected to have a negative impact on the state budget, resulting in a yearly deficit of approximately five billion crowns. They're a small part of the larger austerity package, but one that is likely to be tangible for many Czech consumers.
Among other changes set to take place from 2024 under the new package, corporate tax will increase from 19 percent to 21 percent, property tax will rise by an average of 1.8 times, and excise duty on alcohol will increase by 10 percent per year over the next two years.
Following its approval in the lower house on Friday, the austerity package now only needs to be signed by the Czech President before coming into law, with its changes set to take effect from next year. See the Czech Ministry of finance for a full breakdown of changes.
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