VAT climbs higher

Starting in 2004 the value-added tax rates on selected goods and services will be changed. In most cases changed means raised. Finance ministry estimates indicate that next year the average citizen will pay CZK 1,100 more in VAT than this year.

Most strongly felt will be the jump from 5% to 22% assessed on telecommunications services. Besides calls placed from fixed and mobile lines, this also includes data transmissions, mainly internet connections. So we’ll have to pay extra for admission to the information age that is so heavily promoted by the government. This change won’t affect most firms that pay VAT. They might sense it in decreased demand for their more expensive goods. This relates to already-mentioned telecommunications, from which the finance ministry expects to receive more than 50% of the total amount of increased taxes, as well as other areas. The most frequently used goods and services include auto rentals, used cars, hair dressers, tax consultancy, accounting and legal services, commercial rents, road transport, security services, and real estate services.
There is a large group of products that the government supports but is also imposing higher rates on – ecological products. Prices will rise for biodiesel, biogas, water turbines, heat pumps, solar water heating equipment and photovoltaic cells, small waste-water treatment plants, wind turbines, parts for producing energy-saving light bulbs, electrical cars, catalytic converters, heated wood in the form of sawdust, brickettes and pellets, water-soluble paints and lacquers, and recycled paper.
During the approval of the amended VAT law, many deputies argued that the European Union forces us to raise taxes. That’s not true. The EU requires only that the reduced and basic VAT rates, 5% and 22%, gradually come into line with one another. Groceries are the most important category to remain at the lower rate. Chocolate, coffee, and ice cream will be moved into this category, which means that their prices will go down. Additionally, starting on 1 January 2004, the limit for mandatory registration to pay VAT will be reduced from three to two million crowns. Unless the senate votes the amendment down, which is theoretically possible, the next time you phone new year’s congratulations will cost you about 16% more.






Leave a Reply

Your email address will not be published. Required fields are marked *