Slovak govt rejects report that it would change a law in order not to reduce VAT rate

By bne IntelliNews July 29, 2013

The Slovak government has rejected a report by SME daily, according to which the cabinet planned to change a law adopted by its predecessors in order to leave the value added tax (VAT) rate at its current level of 20%, Hospodarske Noviny daily reported. According the currently valid law, the VAT rate should fall to 19% from 20% once the general government deficit shrinks to below EU’s limit of 3% of gross domestic product (GDP), which is the plan for this year.

Erik Tomas, director of the press and information department of the government office, said that the information published by SME was not correct although Prime Minister Robert Fico was quoted in the report as saying that his government will change the law to keep the higher VAT rate. Tomas said that if the budged gap shrinks to below 3% of GDP this year, the VAT rate will also fall to 19% as the legislation envisages. “The official stance of the government, repeatedly confirmed by the Finance Ministry, is that it will stick to the existing law,” Tomas was quoted as saying.

The government of Iveta Radicova hiked the VAT rate to 20% two years ago as a temporary measure aimed at reducing the budget gap. The deficit narrowed to 4.3% of GDP in 2012 from 5.1% in 2011 and is projected to fall to 2.94% of GDP this year. In that case, the VAT rate will fall to 19% as of 2015, which will result in a loss of state revenues of about EUR 180mn.

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