The President of the Trade and Tourism Association of the Czech Republic, Tomáš Prouza, has confirmed that the planned reduction of value-added tax (VAT) on food products from 15% to 12% will be fully reflected in prices. This move, scheduled to take effect from January 1st, is expected to lead to a 3% decrease in food prices across the country.

Tomáš Prouza emphasized that supermarkets and retail chains will adjust their prices to pass on the VAT reduction directly to consumers. This development is seen as a positive step toward improving the cost of living for households nationwide, providing much-needed relief in terms of expenses related to food consumption.

It is important to note that the VAT reduction will not apply to non-alcoholic beverages, which will continue to be subject to the standard 21% VAT rate. Additionally, the excise tax on spirits will increase by 10 percentage points. These adjustments aim to balance the impact on the overall shopping basket and ensure fairness in the distribution of the tax changes.

While the VAT reduction on food is expected to benefit consumers, there is a need for careful monitoring to ensure that retailers indeed pass on the savings to customers. The objective is to alleviate the financial burden on households and stimulate consumer spending. The government estimates a decrease of 12.9 billion CZK in revenue for the budget next year due to the VAT reduction, and the extent to which consumers will directly benefit remains to be seen.

In addition to food products, the reduced VAT rate of 12% will also apply to certain items such as construction work, children’s car seats, and select medical aids like glasses. On the other hand, the VAT rate on draft beer, hairdressing services, and newspapers will increase from 10% to 21%. These changes are intended to generate additional revenue to fund various public services and initiatives.

Lowering VAT on essential goods and services is a significant step toward improving consumer affordability and stimulating economic activity. It is crucial for businesses to fulfill their responsibility by ensuring that the benefits of the reduced VAT rate reach the households that need them the most. Consumers, on their part, can actively monitor the market and advocate for fair pricing to ensure transparency and the realization of the intended cost savings.

Article by Prague Forum