Posted by on 8 Sep 2010. Filed under Business, Top news. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

Fico says VAT hike is useless, but analysts disagree

The temporary hike in VAT from 19% to 20% percent proposed by the government in order to prop up public finances has been criticised by Robert Fico of the opposition.

He says the move is completely useless and just goes to show how Slovakia is being ruled by a right-wing government. ”We should get ready for price hikes, privatisation, and higher energy prices. These are the basic keywords of the right-wing Government” said Fico.

Fico also rejected the claims of the coalition that the hike was made necessary because of the depth of the deficit in public finances that that the new government inherited. He opposes this claim by saying his government left Slovakia’s public finances in an acceptable condition with a deficit of 7% of the GDP – which is the EU average at present.

Political analysts, however, support the government’s decision to increase VAT. Grigorij Meseznikov, for instance, says that although this is not in line with the pre-election promises, it is appropriate considering the economic situation that Slovakia finds itself in following four years of the Robert Fico government, which he says has led to “certain macro-economic fundamentals being abysmal”.

Meseznikov says the 1% rise will not really reflect in prices and the nation wants the economic situation improved. His opinion is shared by analyst Michal Horsky, who says the government has produced a clear proposal.

On whether or not Horsky thinks the government will keep to its promise of returning the VAT to its original level by 2013, he said: “It will be right before the next elections and so the coalition will not be able to afford the faux pas of not returning the tax to its original rate”. He said he trusted also other analysts, who agree that the 1% hike will not impact people’s lives.

The hike in VAT is part of a package of measures laid out by the government on Monday in order to increase budget revenues by around EUR 800 next year.

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