The Senate of the Czech Republic approved the reduction of VAT on several items including baby food yesterday.
As of 1 January 2015, the VAT rate on books, medicines and baby food will be reduced from 21 per cent to 10 per cent, Czech senators decided.
The government believes that the new rate will reduce prices for end consumers. Experts say that the launch of a new lower VAT rate may cut consumer prices, but it will not be a significant fall.
The Czech Republic currently has two VAT rates, of 21 and 15 per cent. Books, baby food and drugs are currently included in the standard VAT, at 21 per cent, while food is subject to a reduced 15-per-cent rate, Radio Prague reported. The introduction of a third VAT rate is part of the state budget. Approved in September by the Czech government, the budget projects a deficit of 2.3 per cent of the country’s GDP.
The move will cost the state budget CZK 2.4 billion (€86.5 million) in lost revenue in 2015, the government estimated.
The VAT reduction has to be signed by Czech president Miloš Zeman before it takes effect on 1 January.
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