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Schmognerova: 20-percent VAT on Food Is European Rarity
Wednesday 15 September 2010 Zoom in | Print page
Bratislava, September 15 (TASR) - Increasing the value-added tax from 19 to 20 percent doesn't have to bring as much money into the state coffers as it is expected by the new Government, former vice-president of the European Bank for Reconstruction and Development (EBRD) Brigita Schmognerova has told TASR in an interview.
"It'll definitely effect consumption, which will be lower. It's necessary to look at the VAT increase in a more comprehensive way and not only via the current calculation on how much incomes it could bring to the budget. The scenario of trans-border shopping in Poland, Czech Republic or Hungary can flourish and the expectations of higher incomes may not pan out," said former finance minister (1998-2002).
According to Schmognerova, the upcoming price increase can have negative social effects too. "Look at the fact that the 20-percent VAT on food or children clothing is a European rarity. In Great Britain, for example, there's a zero-VAT burden on food and children's clothes," she stressed.
Representatives of four Coalition parties agreed at the beginning of September to temporarily increase the VAT tax from its current 19 to 20 percent. This change will be applied until such time as the deficit falls under 3 percent of GDP, which is predicted to happen in 2013.
The reduced rate on books and medication will be maintained at 10 percent. Schmognerova would welcome more items with a reduced VAT rate, however. "It's high time to reassess the issue of a unified VAT rate," she commented.
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