Changes in VAT: a lower rate for food; higher for hairdressers

The parties of the ruling coalition are already coming up with proposals for shifting individual items within the framework of the forthcoming adjustment of the value-added tax (VAT). Instead of two reduced rates of 10 and 15 percent, there should be only one starting next year, probably at 13 or 14 percent.

Some services and goods moved to the lowest VAT rate of 10 percent by the former government of Andrej Babiš (ANO) in the 2020 tax year should also be moved to the highest VAT rate of 21 percent. These included hairdressing services, saunas, and food and beer on tap in restaurants.

Investments in energy

Finance Minister Zbyněk Stanjura (ODS) wants to keep goods and services with a “social and health character” in the uniform reduced VAT rate. The Pirates would also like to see investments in energy savings. The changes are now being discussed.

“We are leaning towards this new single tax rate being 13 percent,” People’s Party MP Michael Kohajda said. He added that the single reduced VAT rate will simplify the application of the tax for taxpayers and make the burden of the tax on goods and services clearer for consumers.

According to the People’s Party, the reduced tax rate should include, in a particular food ( now at a 15% rate ), excluding alcoholic beverages, infant formulas, drinking water, medical devices or aids, and goods used by sick and disabled people.

“On the contrary, it would be appropriate to shift to the basic rate, for example, for cut flowers or other goods and services that are certainly not the basic needs of people, ” added Kohajda.

We would pay extra to have our hair cut

The chairman of the House Committee on Budgets, Josef Bernard (STAN), would shift to the basic 21% service rate for hairdressers and other professions for which the VAT rate has fallen as part of compensation for anti-provision closures. This concerned, among other things, accommodation services, culture, and sports.

Opposition ANO disagrees with the unification of two lower VAT rates, as this would probably increase the price of some goods and services, including water and sewage or medicines.

“We are in favor of canceling the 15% rate provided that these items move to a reduced 10% rate. From the introductory rate of 21%, moving energy for housing to the reduced rate is necessary. These are not luxury goods, so there is no reason for us to burden households still enormously, ” SPD MP Jan Hrnčíř said.