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Slovak producers hope that reduced VAT boosts food sales

Staff writer |
Reduction of the value added tax (VAT) on selected basic foodstuffs from 20% to 10% is one of those more noticeable out of 15 measures of the second social package Prime Minister Robert Fico unveiled.

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Slovak food producers pin hope on this measure, anticipating that the lower VAT would reflect in lower prices, boosting their sales, but experts and market watchers warn about inflated expectations.

The government plans to reduce VAT on basic foodstuffs as of beginning of 2016, but so far the exact list of basic foodstuffs has not been defined yet. The foods mentioned so far include milk, bread, butter, fresh meat and maybe fresh-water fish and fruits and vegetables.

The government plans to sign memoranda about reduction of prices due to lower VAT with retail chains and use pensioners to watch prices in stores to monitor whether merchants really reduced the prices. Estimates how much this measure will cost the state budged oscillates between €60 million and €100 million in lost budgetary revenues.

Slovak food producers welcome the plan to reduce VAT on basic foods.

Food producers believe that lower VAT on food would positively affect the behaviour of consumers and help reduce shopping of Slovaks abroad as neighbouring countries often have lower VAT on food and thus also lower prices. This way they hope that the current 40-percent share of local foods in shops would increase.

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